Alibaba (BABA) - Get Report Executive Chairman Jack Ma and Argentina President Mauricio Macri signed a Memorandum of Understanding (MOU) on Tuesday in Buenos Aires as a way to open up new trade opportunities and to support merchants that are marketing products on Alibaba's e-commerce platforms.
"This agreement strengthens trade between Argentina and China," Alibaba President Michael Evans said in the announcement. MOUs are not legally binding but are considered formal agreements.
The MOU focuses on two areas: wine and fresh foods. Under the conditions of the partnership, Alibaba's e-commerce platforms are being declared official channels by Argentina, which happens to be the fifth-largest producer of agricultural products worldwide. "The ultimate beneficiaries will be the merchants, especially small and medium enterprises, who will gain access to unprecedented cross-border trade opportunities through Alibaba's platforms," Evans noted.
Tigress Financial Partners CIO Ivan Feinseth said Alibaba has been working to bring other countries onto its platform. "I believe this is a good business move for Alibaba," he said.
The partnership comes at a time when the stock has been on a run, trading up nearly 55% in the past year and up nearly 35% year-to-date to $118.09 on Tuesday.
The partnership works well because Argentina is known in particular for both its wine and foods and Chinese consumers have a growing appetite for fresh produce and wine. Since the Chinese population still drinks considerably less wine than that of France and the U.S., Argentina exporters have a huge growth opportunity open to them through Alibaba's selling platforms.
Alibaba and Argentina will also be working together to increase awareness of Argentina's wine culture and to promote the selling of Argentine beef, chicken and seafood in China.
In February, Alibaba signed a MOU with logistics company Australia Post, giving it access to the Southeast Asia market through its e-commerce platform known as Lazada Group. In addition, Australia Post will work with Alibaba-owned Cainiao Network to improve how packages are delivered from Australia to China.
While Alibaba seems to be signing more MOUs as of late, there's nothing unusual about it as it's simply good business to do so, Feinseth noted.
Separately, Alibaba will report 2017 fourth quarter results on May 18 before the market opens. Analysts are expecting the company to report earnings of 69 cents per share on revenue of $5.199 billion. Tigress Financial has a "buy" rating on Alibaba and sees the stock continuing to go up so long as it keeps reporting growth in sales, participation and engagement, Feinseth said.