Article / 05 June 2015 at 4:34 GMT

Alibaba aims small in quest to become China's Bloomberg

China Watcher / Shanghai
China
  • Alibaba has formed a joint venture with China Business News
  • It aims to provide quality domestic financial information to investors
  • While its main competitor is Bloomberg, Alibaba will target SMEs

By Neil Flynn

Alibaba has invested RMB 1.2 billion into China Business News in order to create a new financial data and information services joint venture firm. With the increasing interest in domestic financial markets from retail investors, and the growth in the number of domestically focused investment firms, there is a growing demand for financial news and data.

China Business News
Source: China Business News  

As part of the announcement, Alibaba’s founder Jack Ma said that the era of data technology will surpass the information technology era. This is evident through the development of the mobile ecosystem that we have seen over the past two years. Chinese tech firms have focused on building an ecosystem of services in order to collect data on user behaviour, which is typically monetised through tailored advertising. 

However, with the launch of Tencent and Alibaba’s respective internet banking platforms, investors are seeing that user-behaviour data collection can be monetised in many more ways. Alibaba has collected user behaviour and payment history data through its mobile payment app Alipay over the past 10 years, and by analysing this data, the firm is able to calculate a credit score for each individual user, and use this to offer personal and micro loans through its MyBank subsidiary.

Demand for professional data services

Professional data services such as the Bloomberg Terminal are widely used in major financial institutions in China – due to the lack of a viable domestic alternative and because overseas clients communicate through the Terminal. Bloomberg has a difficult relationship with the Chinese government, and users cannot access its website without a VPN. The firm has also seen its office raided by Chinese police. So while the Terminals work in Mainland China, the high price comes with the risk that access may be restricted in the future.

Alibaba will likely target the small to medium-sized investment firms who typically focus on the domestic Chinese market and don’t have overseas clients. For this demographic, it’s difficult to justify the cost of a Bloomberg Terminal, and the quality of the domestic data isn’t as good as domestic rivals. 

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 There is growing demand for financial news and data in China and Alibaba’s investment
in the industry is a sign of the strong potential. Photo: iStock

As we have seen with Bloomberg Terminals, a professional data service will likely be a long-term investment for clients. Given that financial models are connected to the data stream, it is difficult to justify switching services unless there is a substantially better or cheaper service available. Likewise, having a social element to a data platform will allow firms to communicate with their clients, and this will again increase the stickiness of users.

CBN and Alibaba have previously collaborated by using Alipay to provide real-time stock quotes and for a wealth management information product. Alipay has its own fund distribution platform, Yu’e Bao, (余额宝), which has seen retail investors move away from the traditional bank distribution platforms. Tencent has also developed a distribution platform through its JD.com subsidiary. This shows that China’s tech firms are showing an increasing interest in monetising the growing demand for retail investment data and platforms.

Tapping into China’s interest in investing

Professional financial data and information services is a very promising industry in China, because there are no major domestic players to rival the established Western brands. Alibaba’s investment in the industry is certainly a sign that there is strong potential. I would be very surprised if its BAT rivals Baidu and Tencent don’t make similar investments during the year. 

Baidu has been actively developing its big data technology with the hiring of chief scientist Andrew Ng – of Stanford and Coursera fame – to set up a Silicon Valley research division, and management has discussed how this has implications for investment forecasting. Tencent is Alibaba’s biggest rival and the two firms tend to make very similar investments across a wide range of industries. 

Tencent's WeChat app has an established wealth management platform, and the launch of its Internet bank WeBank should encourage the firm to develop its financial data and information service.

In addition to CBN, a popular financial news firm is Caixin, which has more of an international presence due to having an English site. While these traditional news portals have clear value, Xueqiu (雪球 – Snowball) has become very popular over the past few years. It is similar to the popular Western platform StockTwits in the sense that it combines investment news and data with social networking. Xueqiu is focused on both Chinese and US-listed firms, and users are able to discuss and post links about a particular company.

Xueqiu
Source: Xueqiu 

– Edited by Gayle Bryant

Neil Flynn is a portfolio manager at Alcuin Asset Management. Follow Neil or post your comment below to engage with Saxo Bank's social trading platform.

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