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| Phil Lee, head of Asia Pacific research at Mirae Asset Global Investments, refers to data during an interview with The Korea Times at the company's office in Causeway Bay, Hong Kong, Wednesday. Korea Times photo by Kim Bo-eun |
Long-term outlook positive for internet stocks, Mirae Asset chief researcher says, also referring to value of EV supply chain and solar power shares
By Kim Bo-eun
HONG KONG ― China's internet stocks have been top picks for investors around the world for years, but the government's regulatory stance toward the companies has led the shares to plunge over the past year. Stocks of Big Tech companies such as Alibaba have begun recovering in recent weeks, but analysts have referred to China's green energy stocks as holding greater investment value.
Phil Lee, head of Asia Pacific research at Mirae Asset Global Investments, said the outlook for China's Big Tech firms could be positive in the long-run, as their focus increases on cloud and artificial intelligence. But in the meantime, he estimated their growth from advertising ― the core business model for consumer internet companies ― to stand at around 10 percent in the coming years, down from 30 percent growth on an annual basis these firms achieved in previous years.
Lee referred to the figures supporting his view ― online advertisements now account for over 80 percent of China's entire advertising market, which compares with the global average of 50 to 60 percent.
"Future growth potential will come from the cloud business, but there are various factors that could limit growth, such as U.S. influence that could restrict the adoption of Chinese firms' services in lucrative markets," he said.
The chief researcher said China's manufacturing sector, such as electric vehicles (EV), would remain attractive despite these risks.
"China's EVs and batteries will continue to be exported to major markets given their price competitiveness. Moreover, EVs and batteries are less associated with security risks that the U.S. has cited as grounds to sanction chip and telecommunications equipment companies."
China's CATL currently leads the global market for EV batteries. Lee noted that the competitiveness comes from China becoming capable of making battery manufacturing equipment in the past decade, instead of relying on foreign suppliers, which poses a cost burden as well as supply chain risks. This has enabled China's manufacturers to supply batteries that are 20 percent cheaper than those produced in other countries.
He also referred to an ecosystem in China's EV supply chain, where battery makers work with new automakers such as Xpeng and Li Auto to experiment and come up with innovations.
"Such collaboration offers the companies opportunities to boost value creation capabilities ―- such as coming up with total solutions."
This compares with the traditional, rigid relationship between battery manufacturers and carmakers, which could limit collaboration.
There are forecasts that pure battery EVs could reach 40 percent of the world's new car sales in 2030, up from 5.5 percent last year and grow further beyond that point.
The forecasted figure will be backed by self-driving vehicles, which will be EVs not only to adhere to carbon emission regulations, but also because electric cars have faster reaction times compared to internal combustion counterparts. This means they have a shorter delay between the time it decides to make and the time it completes a maneuver.
Lee noted another promising sector is solar modules, which China also leads. China is also capable of producing equipment manufacturing solar modules. Solar power has been identified as the lowest-cost energy, and demand has grown for the green energy to meet carbon neutrality goals and to secure substitutes for disrupted energy supply stemming from the Ukraine war. Prices of the solar panel material, polysilicon, hit an eight-month high last month, driven by surging demand.
In the meantime, the research head said China's stocks are expected to show decent performance at a time when markets in most major economies have entered a bear market, amid high inflation rates and concerns of a U.S. recession.
"With Shanghai's lockdown over, and government policies to boost the economy, the macro environment for China appears more favorable than that of the U.S. or countries in Europe," he said.
"This is being reflected in the market and is expected to last for the time being."
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