The Unicorns of China Tech Continue to March On and On!
Tencent , Alibaba and Baidu have proven a tremendous success after IPO’s – 3 more are coming!
Science and technology have developed rapidly in China during the 1990s to 2010s. The Chinese government has placed emphasis through funding, reform, and societal status on science and technology as a fundamental part of the socio-economic development of the country as well as for national prestige. China has made rapid advances in areas such as education, infrastructure, high-tech manufacturing, academic publishing, patents, and commercial applications and is now in some areas and by some measures a world leader.
China’s technology and innovation sectors have made tremendous strides. The scale of the country’s digital economy has reached Rmb22.6tn ($3.6tn), taking up about one-third of Chinese gross domestic product, according to China’s internet authority CAC (Cyberspace Administration of China). China’s tech companies are leading the country’s internationalising momentum. Collectively known as BAT — signifying the search engine firm Baidu, the e-commerce giant Alibaba and the social messaging company Tencent — these 3 ‘unicorns’ are frequently compared with Google, Amazon and Facebook. In many ways, the Chinese digital conglomerates are increasingly behaving just like their counterparts in the West.
Baidu is China’s largest search engine. Google left China in 2010, allowing the Chinese company to grow with relatively little competition. It now controls around 80% of domestic market share. It offers an encyclopedia similar to Wikipedia, though editing permissions are more tightly controlled. Other services include maps, social media and music. The company conducts research into artificial intelligence and self-driving cars.
Alibaba is an e-commerce firm that operates two main online portals: Taobao, for consumer-to-consumer commerce, and a business-to-consumer counterpart, Tmall. The company has also developed a successful payments service, Alipay, which it spun off as a subsidiary of Ant Financial. Alibaba has a cloud computing division and owns the South China Morning Post.
Tencent is the owner of WeChat, a messaging service with close to a billion users. The app supports a popular payments service as well as a number of other features, leading FastCompany to call it China’s “app for everything.” The company also owns successful massive multiplayer online games such as Clash of Clans, which boasts tens of millions of users.
All three may have their haters but I’m not sure how long the ‘haters are gonna keep hating’ or how long the haters can afford to ignore these companies.
One of the easiest ways to gain exposure to the performance of these companies is to buy a managed fund such as the Fidelity China consumer fund.
If you’re an expat here in China you should use a tax efficient platform to hold this and may be other funds in a balanced portfolio.
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If holding shares is part of your portfolio watch out this year from IPO’s from Xiaomi , Tencent Music & Entertainment and Douyu.
The Chinese streaming giant will decide who will help it float for an IPO in the US that’s expected to value it at $25 billion.
Should the company reach a $25bn public valuation, it would be the fourth biggest US-listed technology IPO on record
Tencent Music reportedly has plans to raise up to $4bn for TME in readiness from Investment Banks in New York and reports are this is actively happening at the time of writing.
Xiaomi Corp. has won Hong Kong stock exchange approval for its planned initial public offering (on June 8th 2018)
Douyu is a live gaming video site similar to Twitch, a US-based company acquired by Amazon in 2014 for $970 million. Founded in 2013 as AcFun Live, a live broadcasting division of AcFun, Douyu changed its name became independent in January 2015. Tencent is a major investor!
Douyu TV, an online entertainment company that broadcasts live e-sports events, has hit a reported valuation of US$100 million after a Series B funding round led by social giant Tencent Holdings
Watch this space!