Asia Briefing: China tech stocks the ones to watch

Tencent, Alibaba, Baidu and Sina on shopping spree

Icons of messaging applications WhatsApp of Facebook (L), Laiwang of Alibaba Group (C) and WeChat, or Weixin, of Tencent Group

China’s broader economy may be slowing but some parts of its technology sector are on fire. For many years, the country’s tech stocks have played catch-up to their Western counterparts, taking inspiration from ideas from overseas but rarely leading the way.

What was striking amid all the fuss about Facebook's €13.77 billion acquisition of the messaging service WhatsApp was that there are even more radical things going on in the mobile space, and a lot of them are happening in China.

As with so many other industries in China, this is a numbers game. The sheer scale is immense. The number of people who accessed the Internet using their smartphones, mobiles or tablets reached 500 million in China by the end of December, according to the China Internet Network Information Centre. That's about the same as the population of North America.

More than 80 per cent of all internet users in China access the web through mobile devices, making it a hugely appealing, and viciously competitive, market. And the big players – and they are very big indeed – are on the prowl for acquisition targets.


Among the companies on shopping trips are Tencent Holdings, Asia's largest Internet company, and the fourth biggest in the world after Google, Amazon and eBay. Its revenues are bigger than Facebook by around €1.45 billion.

E-commerce group Alibaba, currently getting ready for a listing which looks certain to value it at more than €100 billion, is on the hunt for targets to shore up its businesses in the battle for China's 618 million web users.

The country's biggest search engine Baidu is also looking at targets in the mobile space.

The Beijing-based company said it will focus on acquisitions this year to boost its presence on smartphone screens and take on its bigger rivals Tencent and Alibaba in the mobile market.

Full-year results for 2103 saw Baidu’s revenues rise but profits fall on the back of a spending spree. Baidu said it expected revenues of between €1 billion and €1.5 billion in the current quarter, up as much as 60 per cent on a year ago.

Baidu’s mobile revenues accounted for more than 20 per cent of revenues last year, and it hopes a $2.5 billion (€1.8bn) spending spree will help it meet this target, even at the expense of profits.

The company still gets the vast majority of its mobile revenues from Baidu search, but chief executive Robin Li hopes to increase revenue from other mobile services.

“Building out our platform to capture the huge opportunities ahead remains our focus for 2014. We are confident that Baidu’s technology DNA and unparalleled data capabilities will be crucial competitive advantages as China’s Internet landscape continues to shift,” said Robin Li.

The company has a sturdy war chest of over €1.1 billion, and this year it wants to focus on gaming, music and social media, Li said, in addition to expanding location-based services, including combining its map software with recently acquired group-buying business Nuomi.

The internet giant Sina said last week that it plans to spin off its Twitter-style microblog unit, Weibo, in a New York initial public offering "relatively soon", and has hired Credit Suisse and Goldman Sachs to handle the US offering.

Sina Weibo is the most popular microblogging outlet in China with 61.4 million daily users. Weibo users were posting 130 million messages a day by the end of October 2013.

It is 18 per cent owned by Alibaba. The company hopes to raise around €362 million from the listing and it is due to take place in the first half of the year, and the listing would give Sina Weibo a €5.8 billion valuation, a huge premium on its current market cap of €3.62 billion.

Weibo microblogs, which are operated by many companies but Sina’s is the biggest, allow users to send short messages of 140 characters or less to their followers. In Chinese, a character is a word or at least half a word, so this can represent a pretty long message.

Sina Weibo’s popularity has come under pressure from Tencent’s messaging application WeChat messaging application, known as Weixin in China. Active users of microblogs in China fell by a tenth between 2012 and 2013.

At the same time, Weibo’s daily active users increased from 60.2 million at the end of September 2013 to 61.4 million by the end of the year, up from 46.2 million at the end of 2012.