Chinese tech giants Alibaba and Tencent showed their willingness to continue pursuing their investments whenever a strategic rationale surfaces on both its infrastructure companies and even those outside of their brand names.
Alibaba
Last Monday, Alibaba announced that it would buy 10 percent or a greater stake in Chinese courier company Yunda. The entity is currently valued at 8.8 billion USD on the Shanghai exchange. According to Reuters, it could acquire the said shares with a discount of up to 10 percent relative to the company's stock price on the last trading day before the deal takes effect.
Alibaba currently holds a majority stake in a Chinese logistics giant Cainiao. The company engages in business with third-party shipping firms. Similarly, Alibaba also holds a majority stake in a company that engages in similar business activity with Cainiao, Chinese courier STO Express.
Tencent
On the other hand, Tencent participated in a one billion USD funding round for Chinese online education firm Yuanfudao. The company holds a record of 400 million users and has a current market value of 7.8 billion USD.
In the same manner, Tencent also took part in a 2.4 billion USD funding round for the Chinese online housing platform named Beike. The round was led by a Japan's fintech firm Softbank. Additionally, Tencent also partook in a 300 million USD round for Chinese data mining software firm MiningLamp and recently closed a previously-announced deal in buying a 10 percent stake in Universal Music Group.
The strategic deals that the Chinese tech firms engaged in showed similar strategic deals that mirrored that of US companies. Last week, Microsoft announced its willingness to buy mobile infrastructure software from Affirmed Networks. The deal was said to be worth 1.35 billion USD. Facebook, on the other hand, was revealed to be in talks with a multi-billion-dollar stake in India's mobile carrier Reliance Jio.
The report claimed that both Alibaba and Tencent would continue their large investments in their data center infrastructures after the economic crisis in China proved to be growing in the online platform industry. There have been usage spikes for digital applications and cloud services after the 'work-at-home' business culture emerged in China. The market was expected to be productive in the coming months.
Last week, US companies Micron and Nvidia also showed signs that they recognize the business opportunities that emerged due to the strong demand from both Chinese and US cloud companies.
The report also claimed that Tencent and Alibaba's cash balances proved that they would not be challenged in financing their investments sufficiently even if the pandemic has disrupted business activity in China resulting in near-term cash flows.
By the end of 2019, Alibaba generated a 50-billion USD cash yield while Tencent had 28 billion USD. Tencent also perceived that the fair value of its financial portfolio of equity investments would be at 59.3 billion USD.
