Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Asia’s Digital Dragon, $80 Billion and 1.1 Billion Users by 2015

Economics / Technology Sep 24, 2010 - 05:48 PM GMT

By: Dian_L_Chu

Economics

Best Financial Markets Analysis ArticleWith just over 1.3 billion people (as of mid-2008), China accounts for about 20 percent of the world population and needless to say, is the world's largest and most populous country. Although the country’s population growth has been somewhat slowed by the one child policy (in effect since 1979), its internet population has been growing leaps and bounds over the last ten years. (Figure 1)


As of June 2010, China's netizenship climbed to 420 million, more than the population of the entire United States. However, the penetration rate of internet users remains low at only 31.8 percent, compared with a more mature U.S. market of near 70 percent.

Some believe the growth rate of China’s internet users will slow along with its economy as the rate went from 53 percent yearly growth in 2007 down to about 29 percent in 2009 and is trending to be probably under 20 percent in 2010.

Now, McKinsey Quarterly just released a new forecast this week based on a survey conducted across China, India, and Malaysia. According to McKinsy, Asia’s internet users will reach more than 1.1 billion by 2015 (Exhibit 1). Furthermore, within five years, this market may generate revenues of more than $80 billion in internet commerce, access fees, device sales, etc. (Exhibit 2)

Based on McKinsey’s projection, over the next five years, while China’s internet users will double in size hitting 55 percent of the population, India’s netizenship is posed to increase near five-fold to 28 percent of its population. However, due to market size and income levels, the revenue growth potential clearly resides with China, growing around 38 percent per year through 2015 (Exhibit 2).

The McKinsey study also highlights the differences in the usage pattern and content preference among the three countries. But although they are at very different stages of their digital evolution, all three have one trend in common-- the increasing use of digital media such as instant messaging, social networks, gaming, and streaming video.

This has vast implications in future marketing efforts for companies targeting the increasingly affluent Asian/Chinese consumers. It also means tremendous growth opportunity for the technology sector such as communication infrastructure, content and web services providers, E-commerce platforms and high tech mobile devices.

However, China--the biggest digital market of Asia--has proven quite elusive for foreign companies, mostly due to market specific factors including policies, and cultural difference. Homegrowns –such as Taobao.com (淘寶網) and Baidu (百度)--without a doubt rule China with dominant market share advantage, while the de facto exits of Google and eBay serve as two business case studies of “How To Fumble in China”.

For instance, Taobao, owned by Alibaba Group (1688:HK), has over 80% of China’s online shopping market, trailed far behind by Tencent’s Paipai and eBay/Eachnet. there is already speculation about an IPO of Taobao amid strong growth. Baidu (BIDU), on the other hand, boasts search market revenue share in China of 70 percent for the first time as of Q2 2010, while Google’s market share languished from 31% to 24% in the same period.

The good news is that things are expected to change with Beijing slowly starting to relax restrictions to let in foreign companies. Nevertheless, domestic companies like Alibaba and Baidu will likely share the bulk of the monetization potential of 770 million internet users in the next five year, while foreign companies learn and adapt to the treacherous market of China.

China already has one of the world’s largest optic transmitting network, and is spending billions to build up even more infrastructure. While the developed countries race to catch up, a fastly growing broadband population could bring an "Eastern shift" of technology innovation making China "the cool kid on the block", where the rest of the world look for the hottest devices and services, very much like the U.S. and Europe today.

Meanwhile, investors interested in riding the digital dragon of Asia could invest through companies already with foothold in the region, and/or technology focused exchange-traded funds (ETFs).

Infrastructure companies such as Alcatel-Lucent (ALU), China Telecom (CHA), and China Mobile(CHL), niche mobile devices like iPhone and iPad by Apple (AAPL), in addition to Baidu (BIDU), are a few examples of individual stocks.

ETF choices include Global X China Technology ETF (CHIB), Claymore China Technology ETF (CQQQ), iShares China ETF (FXI), while iShares MSCI Taiwan Index Fund (EWT) gives exposure to “The Other China” that's more digitally advanced.

Note: Full report of the McKinsy Quarterly is available here (free registration)

Disclosure: No Positions

Dian L. Chu, M.B.A., C.P.M. and Chartered Economist, is a market analyst and financial writer regularly contributing to Seeking Alpha, Zero Hedge, and other major investment websites. Ms. Chu has been syndicated to Reuters, USA Today, NPR, and BusinessWeek. She blogs at Economic Forecasts & Opinions.

© 2010 Copyright Dian L. Chu - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in