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UPDATE 1-Hedge fund Third Point bets on Alibaba, again

(New throughout, adds details on investments, outlook)

BOSTON, July 26 (Reuters) - Hedge fund Third Point made a new bet on Chinese e-commerce firm Alibaba during the second quarter and told investors in a letter that it was still finding attractive new opportunities even as the stock market has surged this year.

The $16.5 billion New York-based firm, run by Daniel Loeb, gained 10.7 percent in the first half, making it one of a small number of hedge funds that beat the Standard & Poor's 500 index's 9.3 percent gain. The average hedge fund returned 3.68 percent in the first half, HFR data show.

Calling Alibaba one of the "best business models in the global internet sector" and a "clear winner in the consolidated Chinese ecommerce market," Loeb said the company stands to benefit from changes it made to its advertising platform. Reuters saw a copy of the letter.

The company listed its shares in the United States two years ago and immediately attracted wide hedge fund ownership which quickly dwindled after the listing.

As part of Third Point's focus on international investments, Loeb also underscored his bets on European stocks where the firm's exposure is now at its highest level since 2010. Third Point last month announced an investment in Swiss conglomerate Nestle, which makes food products from baby food to chocolate.

Loeb adjusted the portfolio during the second quarter to focus more on companies that will benefit from low inflation while cutting his exposure to bank financials. He also exited reflationary macro trades.

Third Point also made a new bet on BlackRock, the world's biggest asset manager with $5.7 trillion, calling it a "misunderstood franchise that is just beginning to inflect." Demand for lower cost investments like ETFs, where BlackRock is a leader, is likely to pick up, benefiting the company, Third Point said. BlackRock said "We are aware that Third Point has taken an ownership position and we welcome them as a shareholder."

During the quarter, the biggest winners for Third Point were Baxter International Inc, Nestle SA, Constellation Brands Inc, auction house Sotheby's and Honeywell International Inc. The biggest losers included JPMorgan Chase & Co and T-Mobile US Inc .

Third Point also said it will stop taking in new money from new investors on Oct. 1, 2017. For years, Third Point turned away would-be investors but it had quietly opened up again for a brief time in the last year to replace money that had left. (Additional reporting by Trevor Hunnicutt; Editing by David Gregorio)