Hedgeye CEO Keith McCullough is adding Alibaba (BABA) to the short side of Investing Ideas. Below is a brief note.

I've been waiting on a bounce in BABA to lower-highs... and we got that in the last few days...

Here's an excerpt from an awesome proprietary tool China analyst Felix Wang built for our Institutional Research clients tracking Chinese demand in real-time (he’s long PDD vs. BABA short):

WHY IT MATTERS

The Wechat Index is one of the tools we use to gauge user engagement and interest in China. It's a keyword popularity index. While the time series is volatile, trends in the index can be helpful in identifying changes in user activity and preferences. We collect index data daily for each of the keywords, and for smoothing purposes, we exclude any outliers/special events.   

CONCLUSIONS

In the e-commerce space, JD, Fresh Hippo (BABA), and Kaola (BABA) were the notable laggards. While some of the traffic for JD are likely redirected to Jingxi which is not captured by the Wechat index, this was surprising given JD was the relative winner in Q1 among the Big 3 in Wechat engagement. With logistics infrastructure back to normal and less COVID-19 concerns in China, Wechat shoppers may be less focused on getting the best logistics i.e. JD and more focused on low prices.  Fresh Hippo's decline isn't surprising as the surge in fresh e-commerce was short-lived as we expected. Consumers are returning to supermarkets and wet markets, albeit cautiously. Kaola may be lagging given the international trade disruption from COVID-19 worldwide.

Sell the bounce,

KM