Citi released a report on the Internet Industry in the Asia-Pacific region, indicating that last year, the Global Internet Sector saw a mixed performance in stock prices. Internet stocks in India outperformed with an increase of 73.7%, followed by Southeast Asia at 35.3%, Japan at 35%, and the USA at 33.8%, while China and South Korea's Internet sectors lagged with increases of 15.6% and a decline of 11.4%, respectively. Geopolitical tensions and changes in tariffs and regulatory policies may continue to affect cross-regional investor sentiment and portfolio allocation.
The report indicated that the valuation of the Internet sector in China is reasonable and its growth quality is continuously improving, but it is still considered closely related to the pace of recovery in the macro economy and Consumer spending in the mainland. The top picks for the Internet sector in China for the first half of this year are Tencent (00700.HK), Trip.com (TCOM.US), MEITUAN-W (03690.HK), JD.com (JD.US), Full Truck Alliance (YMM.US), and 37 Interactive Entertainment Network Technology Group (002555.SZ), all assigned a ‘Buy’ rating, with Target Prices set at 573 HKD, 78 USD, 203 HKD, 51 USD, 15 USD, and 20 RMB, respectively.
The report states that five major trends are expected in the Internet sector in China: the first is the opportunities and challenges brought by AI, including the adoption and monetization of AI applications, growth in cloud computing, increasing opportunities from AI search, and threats to existing advertising formats. The second is overseas strategies; the third is Consumer behavior; the fourth is content quality and innovation, which are key to supporting monetization and user engagement; and the fifth is Shareholder returns, with buyback progress likely to be slower than in 2024.
