Chinese Investors Are Champing at the Bit to Buy Into This Tech Giant

The craziest anomaly in finance is about to be righted...

Up until November 25, Chinese citizens had no way to legally buy the biggest Chinese stock on Earth.

It had only been listed in the U.S., keeping investors in the business' home country from buying in.

Our colleague and True Wealth editor Steve Sjuggerud compared this situation with U.S. investors not being able to buy shares of Amazon or Alphabet.

But that all changed on November 25. That's when Alibaba (NYSE: BABA) listed in a secondary offering in Hong Kong.

And now, mainland Chinese investors will finally be able to buy in to their country's largest company while it still enjoys this rapid growth.

Earlier this year, Alibaba laid out plans to list in Hong Kong. The offering was delayed due to the ongoing protests in the city, but it was eventually given the go-ahead.

On November 20, Alibaba priced its Hong Kong offering, setting the final wheels in motion to list in Hong Kong. And the offering saw very high demand... The IPO's retail portion alone was 40 times oversubscribed.

Think about that for a moment. Alibaba listed 500 million new IPO shares. It gave retail investors a crack at 12.5 million of them... and demand was 40 times that amount.

It raised $13 billion initially, before exercising an option to make the offering bigger due to high demand. It added another $1.7 billion to the offering, taking the total close to $15 billion.

Alibaba still has to apply for inclusion to be traded in the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programs. These programs allow qualified mainland Chinese investors to purchase Hong Kong-listed shares through their local brokers. But it's only a matter of time...

It's clear to see why there's so much pent-up demand for Alibaba shares in China...

Alibaba is the world's seventh-largest stock... and it's the largest non-U.S. stock.

Alibaba is the Amazon of China.

In fact, it's the world leader in online retail – ahead of Amazon. And it's still growing...

In the third quarter, Alibaba grew its network to 693 million annual active consumers. That's a 15% increase over the 601 million it had in the third quarter of 2018. To put that into perspective... the entire population of the United States is only 330 million... and Alibaba has more than double that in annual active consumers.

Meanwhile, Amazon's customer base is nowhere near that size. It last reported about 300 million active users in 2016 – and based on its recent growth rates, Amazon most likely hasn't even cracked the 330 million mark today.

There's no question that Alibaba is massive. But the story gets much better...

Alibaba is growing at a breakneck pace. Over the past 12 months, Alibaba grew revenue by 36% to roughly $64 billion. Growth like that is normally reserved for startups. But it's still happening for Alibaba.

Wall Street analysts expect Alibaba to grow its revenues by 30% for at least the next two years. And a big driver for this growth is the variety of shopping options Alibaba offers...

The first one is Alibaba's U.S. consumer site, called AliExpress. It allows U.S. consumers to buy Chinese goods directly. Want a bracelet, plush toy, or keychain directly from China? Want five of the same pair of shoes? AliExpress is the way to go.

But AliExpress is only a small piece of what Alibaba does...

Alibaba's online portals reach its users through three major formats: business-to-business ("B2B"), business-to-consumer ("B2C"), and consumer-to-consumer ("C2C"). AliExpress is an example of B2C, selling directly to individuals.

The big brother to AliExpress is Alibaba.com, a B2B platform that gets Chinese manufacturers in touch with bulk buyers around the world. This is where you go when you want 100 or 1,000 of something.

It's easy to see why Alibaba dominates this space. The majority of its revenue comes from retail – and it has mastered every facet of the business.

But there's another segment that will be incredibly important for Alibaba in the coming years: mobile payments. We've covered the digital payments trend in recent issues of Stock of the Week with Square (NYSE: SQ) and MercadoLibre (Nasdaq: MELI).

Alibaba's payments system, Alipay, crossed the 1 billion-user threshold earlier this year. Think about that... More than 10% of the world's population uses Alipay as a payment-processing service. And its reach extends over 110 countries. That's powerful.

Alibaba's retail business is huge. Just look at the success of its recent "Singles Day," which is China's equivalent to Black Friday and Cyber Monday.

On Singles' Day, Alibaba sold $38 billion of goods across its platforms. That crushed last year's record of $30.8 billion.

For comparison, Black Friday and Cyber Monday accounted for a combined $14 billion in online sales last year.

When people in mainland China are finally able to buy in to Alibaba, the demand will be so high that the stock's price will soar.

Alibaba's shares have rebounded strongly since bottoming in January. The stock is up more than 50% from its 2019 low, and it recently hit an 18-month high.

With its strong e-commerce business and the growth opportunity from mobile payments, Alibaba has set itself up to benefit from an increasingly digital world. And the company's recent offering in Hong Kong should create enough demand to push prices higher.

Sometimes investing is simple.