Scottish Mortgage Investment Trust PLC (LSE:SMT) shares were sent higher after receiving a boost from the results of one of its major Chinese tech investments and a resurgence in confidence for US tech and growth stocks.
Alibaba, which is a top-10 holding of the FTSE 100-listed investment company, reported higher than expected revenue growth of 9% to 204bn yuan ($30bn) for the three months to end-March.
Underlying earnings per share in what was its fourth quarter came to 7.95 CNY (US$1.18), which was higher than analyst expectations for earnings of CNY 7.31 and revenue of CNY 199.25bn.
Shares in Alibaba rose 12% to $91 in Hong Kong, having lost around two thirds of its market value – more than US$600bn – since Chinese authorities blocked the initial public offering of its fintech arm Ant Group in late 2020.
Shares in Scottish Mortgage, which reported Alibaba represented 2.6% of its portfolio at the end of April, were up 4.8% at 781.25p after sinking to their lowest levels since June 2020 earlier this week.
Alibaba said that Beijing’s repeated Covid lockdowns hurt business, in particular logistics and supply chain issues, along with lower consumer demand.
In April, the company's revenue was down by a low single-digit percentage compared to a year earlier though May had seen an improvement.
In an emergency online meeting this week, Chinese premier Li Keqiang urged local officials to carry out various measures to support the economy, though Beijing continues to maintain its 'zero Covid' policy that has led to rolling lockdowns.
Earlier this month, Scottish Mortgage managers admitted that, in retrospect, they had made "a mistake" in not reducing their holdings in Chinese companies following Beijing’s regulatory crackdowns on various companies.
Yesterday's annual report from the investment trust revealed that its China investments had been the biggest weight on the performance of the portfolio, with a £1.7bn depreciation over the year to the end of March, compared to a £516mln depreciation from EU assets, £80mln from the UK and a gain of £224mln from US stocks.
Of this, Alibaba's contribution was a 47% absolute loss individually and a negative 1.6% contribution to the whole portfolio's performance.
The fair value of SMT's Alibaba stake at the end of March at £419mln, down from £792.5mln a year earlier.