Photographer: David Paul Morris/Bloomberg

Amazon Lures Investors Back From Alibaba

China concerns weigh on Alibaba shares

China is no longer in vogue with e-commerce investors, as money returns to the U.S. and Amazon.com Inc. following a brief fling with Alibaba Group Holding Ltd. and its 367 million customers.

With a market value of more than $240 billion, Amazon is once again the world's most valuable e-commerce company, a spot it lost after Alibaba's record-setting $25 billion initial public offering in September. Alibaba's current market capitalization is at about $180 billion, down more than 30 percent from its peak in November.

Alibaba reported earnings on Wednesday showing that quarterly sales grew at their slowest pace in three years, with transaction volume falling short of estimates.

Investors viewed Alibaba as a profitable alternative to the free-spending ways of Jeff Bezos, Amazon's chief executive officer. Now, concerns are focused on China's cooling economy and slower consumer spending, as well as Alibaba's reluctance to aggressively pursue business in the U.S. Meanwhile, Amazon impressed investors last month when it reported a surprise second-quarter profit, thanks to its fast-growing cloud-computing business and spending discipline.

"You can't overlook the China slowdown," said RJ Hottovy, an analyst at Morningstar Inc. in Chicago. "Chinese consumer spending trends are in a slowdown." 

Among investors, JPMorgan Chase & Co., Wellington Management Group and TIAA-CREF Investment Management reduced their share holdings in Alibaba by an average of 42 percent in the past three quarters, while increasing their holdings in Amazon by 65 percent, according to data compiled by Bloomberg.

For now, the e-commerce giants are mostly steering clear of each other's home turf. Amazon is focusing its overseas growth ambitions on India after investments in China failed to gain traction. Alibaba in June announced plans to sell its U.S. website 11 Main, and is looking to Russia and Brazil to expand. Rather than sell Chinese goods in the U.S., Alibaba is focused on encouraging American businesses to sell into China.

While Alibaba initially benefited from interest in a new investment opportunity at its market debut, Amazon has the advantage of being publicly traded for almost two decades, said Kirthi Kalyanam, director of the Retail Management Institute at Santa Clara University.

"Familiarity creates a big advantage for Amazon," Kalyanam said. "This is Wall Street saying, 'If you think Alibaba is going to come into the U.S. and take on Amazon, think again.'"

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