Morgan Stanley Initiates Coverage of China Internet Stocks (CTRP, NTES)

Morgan Stanley's Mary Meeker and Richard Ji initiated coverage of the China Internet space with an attractive rating. Their top picks include Ctrip (ticker: CTRP), NetEase (ticker: NTES) and Tencent (instant-messaging business traded in Hong Kong). Their top segment pick is online gaming (they expect local players with self development and distribution capacity to emerge as long-term winners). Here are a number of key extracts / conclusions:

• Chinese Internet companies that focus on creating consumer value have the highest potential to create shareholder value.
• We believe the ‘click plus brick’ model may dominate ecommerce in China; content may prove to be king; foreign companies lagging in localization may lag in market penetration; and local companies may need to become savvy acquirers to outgrow rivals.
• We believe competition is breaking out in online brand advertising, which faces inventory oversupply and a secular shift toward performance-centric models. Paid search, on the other hand, is poised for robust expansion.
• We view mobile value-added services as an overlooked opportunity. Despite regulatory concerns, entry barriers are rising and a segment recovery is in sight.
• We see rising opportunities in online commerce including travel, instant messaging-related services and auctions. Emerging payment mechanisms will be key to more substantive growth.
• Our investment concerns include economic slowdown, regulatory risks, dearth of innovation, management quality and excessive capital inflow.

Related:

• Recent articles on Chinese search companies Sina, Sohu and Baidu.
• Recent articles on Chinese mobile value-added services companies Tom Online, Linktone, KongZhong and Hurray!.
• Recent articles on Chinese online travel services companies Ctrip and eLong.
• Recent articles on Chinese payment services companies.
• The complete list of stocks (and links to articles about them) covered by The China Stock Blog.

Comments

[Juan:]

Baidu, Sohu and other chinese sites appear to have lost 50% of traffic in one week - Help me find out why!…
www.digitalmediareview...

2005 Sep 13 02:00 PM

[vcbeantown:]

How in the world can Mary Meeker have ANY CREDIBILITY in the market????

2005 Sep 14 01:42 PM