Ann: Funds Under Management - January 2020, page-31

Could coronavirus lockdown have big upside for China’s neweconomy stocks as users and smartphones become BFFs?

It’snever happened before: more than 50 million people in the world’s most wiredcountry locked down at home with their smartphones turned into lifelines. Someanalysts think this may later be recognised as a watershed moment, marking thestart of a new era for online services – and the stocks closely tied to them.

HongKong-listed companies linked to online games, digital medical services, remoteworking and distance education are among new economy stocks that soared lastweek, as investors sensed a transformative moment might be at hand – literally– as China’s unprecedented decision to keep tens of millions of peoplequarantined in their flats to combat a deadly new virus deepened mainlanders’intimacy with their smartphones.

Ping AnGood Doctor, China’s leading health care platform, gained 8.6 per cent overfour straight sessions, closing at HK$73.5 on Friday.

It’s tooearly to know whether the lockdown will spur widespread adoption ofnext-generation online services, comparable to how Sars proved to be a turningpoint for adoption of e-commerce in 2003 as worried people stayed home and gothooked on online shopping. But some analysts predict that the unprecedentedexperiment that began on January 23 in Wuhan in Hubei province and extended tobans on large gatherings and closed schools and workplaces throughout much ofChina might lead not only to wider app use but also to profound shifts indeeply rooted cultural beliefs. Hospitals, wet markets and large communitygatherings may come to been seen as potentially dangerous compared to onlinealternatives.

“A fewyears later, we will look back and it might be a turning point when a newecosystem just took off. This whole incident, which is holding people at home,is basically a new era,” said Leon Qi, executive director at Daiwa CapitalMarkets.

“Millionsof people being kept at home is a big trigger for people to download the appsand start using them and get familiarised with what kinds of services can beoffered,” said Qi, whose top stock pick is Ping An Good Doctor. “Thesecompanies spend millions of dollars to get people to use them. They offer allthese free trials. Now this is an ideal scenario to get started.”

And, justas suddenly, a variety of apps that a lot of smartphone users had ignoredbefore were tried out. Early numbers show surges for online games, remote workapps and online medical consultations.

Thelockdown also comes as China rolls out 5G, a superfast wireless networkexpected to revolutionise everything from health care to law to transport.

Meanwhile,a new report suggests a big next-generation smartphone buying spree in thesecond half of the year.

Four in10 mainlanders – 39 per cent – said they will buy a new phone in the next 12months “no matter what,” according to a survey of 6,000 consumers released byJefferies at the end of December.

Of the 97per cent not yet on 5G, 70 per cent signalled interest in signing up for 5Gservice within three to six months.

Thatcould lead to 460 million to 512 million handset unit sales for the 12-monthperiod beginning in the second half of 2020, Jefferies said, with 70 per centor more of the new phones 5G ready.

Thatcould further fuel the move to app-based services expected to catch fire duringthe lockdown, analysts said.

The Sarsepidemic boosted the fortunes of e-commerce, most notably Alibaba, as peoplefeared infection, worked from home at the request of their bosses and tried outordering products from online shopping malls.

“Althoughit sickened thousands and killed almost 800 people, the outbreak had acuriously beneficial impact on the Chinese internet sector,” Duncan Clark wrotein Alibaba: The House that Jack Ma Built. “Sars validated digital mobiletelephony and the internet, and so came to represent the turning point when theinternet emerged as a truly mass medium in China.”

HongKong-listed Alibaba, Ping An Good Doctor and Alibaba Health Information –Alibaba’s health care platform – stand to get the biggest boosts from thelockdown, Wen said.

But AlanLi, portfolio manager at Atta Capital, said he expects Tencent to be thebiggest beneficiary, as cooped-up people turn to online games and otherentertainment. Tencent, the social media and online game giant, is his top“lockdown” pick, followed by food delivery giant Meituan Dianping and Alibaba.

www.scmp.com/business/money/markets-investing/article/3049628/could-coronavirus-lockdown-have-big-upside-chinas