The worst is over! HSBC prefers e-commerce in China's internet sector
Besides, online ads should see lagging improvement after e-commerce, and the online game sector should be back to life as approval of games has resumed slowly.
During HSBC Asia Internet Forum, HSBC discussed regulatory issues with Mr. Lester Ross, Beijing-based partner-in-charge at Wilmer Hale.
In short, HSBC believes the worst appears to be over, but recovery level is uncertain.
The bank likes e-commerce given benefits from consumption stimulus and ease of logistics and supply chain bottlenecks, followed by online ads which should see lagging improvement after e-commerce, and the online game sector as approval of games has resumed slowly.
Here are some takeaways.
1) Is the Chinese Internet sector past the phase of intensifying regulation?
Yes, and the recent change in policy tone to be positive for the platform economy.
However, scrutiny of data usage will remain a key focus.
2) Gov’t equity stakes to become more prevalent?
Possible.
It may tighten the alignment of corporate strategy with national policies, but it may also bring more scrutiny of key corporate initiatives.
3) Will delisting risks be resolved?
Mr. Ross’s base expectation is that the Chinese ADRs may delist in one year.
In addition:
Data issues might become a barrier to fund raising.
Potential restrictions on US investors’ ability to invest in mainland China/HK.