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Excon Fuji Securities Report on Alibaba, China's E-Commerce and the $65 Billion Upside

Excon Fuji Securities
2017-03-29 20:41 2530

- China's e-commerce giants, Alibaba and Tencent are set to grab the biggest piece of the pie from what Excon Fuji Securities calls a $65 billion upside

HONG KONG, March 29, 2017 /PRNewswire/ -- The link between the next financial crises and the financial technology companies grows are as the later assumes more influence in the industry.

Chinese fintech is becoming the next big thing. With estimates $65 billion in sales by 2020, Tencent Holdings and Alibaba Group Holding are said to bag more than 50% of the market share, adding 60% to their market valuation.

Charles Hall, Director of Corporate Equities at Excon Fuji Securities said "this is not a blue-sky scenario; the $65 billion is the result of assuming only 10% market capture rate," Tencent and Alibaba's value could increase by $326 to $391 billion, assuming they will capture 50%-60% of the $65 billion and a valuation multiple of 25 times earnings, according to Excon Fuji Securities.

Excon Fuji Securities expects the online payments market to increase by fourfold to $29.3 billion (CNY202 billion) by 2020. Tencent and Alibaba have a firm grip on the market, with 33% and 55% market share respectively. Online payments are already 50% of the fintech market.

Alibaba and Tencent can analyze consumer data acquired from online transactions to determine creditworthiness. Only 29% of the Chinese residents have credit rating as of now. Cross-selling is another benefit of online payments as consumers buy their cloths and groceries, and pay their utility bills online. Small businesses are also taking advantage of the online payments, 15% has borrowed online through e-commerce.

Corporate loans with 69% share of the lending market are keeping government owned banks busy and have no interest in consumer and small business loans, apart from mortgages, which account only for 15% of the market.

Tencent and Alibaba must play nice with the big banks, for a consumer to open a bank account, they must show up at the branch in person, this makes it difficult for Alibaba and Tencent to acquire consumer deposits and use it to extend loans. Although they have their own Internet banks, this comes as part of the government efforts to discourage Internet companies from taking too much financial risk.

Daniel Sharp, Head of Corporate Trading at Excon Fuji Securities noted "It is worth mentioning that even though Alibaba has the bigger market share now, Tencent is better positioned to take advantage of the China's fintech boom. Alibaba owns only one-third of Ant Financial, Alibaba's financial arm."

About Excon Fuji Securities
Excon Fuji Securities is a long-established private international investment brokerage. Providing private retail and corporate clients a broad range of financial markets and instruments. With over $7 billion (USD) under management and growing, our vision is to become a renowned industry leader in investment services throughout North America, Europe, Asia-Pacific and Australasia. 

Media Contact | Wayne Price, Research Director, Excon Fuji Securities
Email: info@efsecurities.com, wayne.price@efsecurities.com, Contact: +1 647 243 2974

Source: Excon Fuji Securities
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