KrASIA Weekly: Chinese tech giants set on reinventing themselves to stay relevant

2018-11-04

Hi there, it’s Robin.

The stunning decade of China’s internet boom has undeniably slowed down. It is getting more challenging for Chinese tech companies to maintain their rapid growth as competition escalates, increasing governmental impact to govern the internet business and also the ongoing Sino-US trade war.

Cases in point:

CNBC reported that Baidu, Alibaba, and Tencent – collectively known as the “BATs” have seen a wipeout of a total of $165 billion in valuation to-date.
HK-listed Meituan-Dianping only raised a mere $4.2 billion at a 30% discount from its original $6 billion targets. And that reduction proved insufficient even as this O2O platform giant continued to see its market capitalization drop a further 40% to-date. The truth is it is only human to cast doubts over a pre-profit firm who is facing strong competition against the backdrop of a dismal market.
Even after Xiaomi’s scale back from its initial target by more than 50%, the action plan of investors continues to be a “sell” call that has witnessed Xiaomi’s market cap to falling from $54 billion to $33.6 billion.

It seemed that even the global unicorn status of Xiaomi and Meituan did little to stem the falling share prices. The same can be said of the BATs who have scaled great heights. Overall, there is an air of pessimism amongst investors and there are growing questions on the sustainability of the Chinese internet wave.

In the face of these setbacks, the tech giants in China have started to begin their next slew of actions with the main goal at reinventing themselves.

Tencent kickstart its restructure by removing one business group as it seeks to consolidate its efforts on promising trends like social media and content and ramp up its toB business.

This week in Alibaba’s annual letter to shareholders, the company announced of its plans to move beyond China’s e-commerce to become the global entity that offers an array of high-tech services. Some examples of these include cloud hosting, logistics, devices linked to the internet of things (IoT).

Meituan too did an internal announcement of its restructure this week as it seeks to beef up its ecosystem to take on formidable rivals like Alibaba’s new entity – the merger of Ele.me and Koubei.

The only one that has bucked the trend seemed to be Toutiao, the competitor who relied on artificial intelligence to efficiently provide addictive content to its users. This is probably why reinventing is necessary for Chinese tech giants to stay afloat.

Over at Southeast Asia, the boom is literally happening. Indonesia’s Go-Jek is making its next step to foray into Singapore and that is probably going to put Singapore’s ride-hailing space back to equilibrium after Uber’s exit. Drivers now have another option to drive for another ride-hailing company and competition is set to return.

Grab also expanded into the online travel booking space by forging a new partnership with Booking Holdings to allow cross-platform booking. This also bulked up its war chest by a further $200 million to prepare for the burgeoning scale of competition with Go-Jek.

The most noteworthy news in Indonesia this week is really this: the public listing of Passpod. This one-year-old profitable firm decided to take the road less traveled, by heading to the public markets with the belief that an initial public offering is still a viable financing option for young firms. And that could be a route for a company to scale and prepare itself for the next market wave.

After all, it’s been proven. This one-year-old firm who is not a global unicorn saw an oversubscription of shares on its public debut. And the global unicorn status did not protect Chinese internet giants from the dismal market. They ended up lowering their initial target for a less-than-spectacular initial public offering.

Read on to find out more interesting stories from last week, and feel free to tip us if you have news clue or you just want to talk with us, email us at hello@kr-asia.com and we are looking forward to hearing from you.

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