China Internet sector set to soar even higher in 2021 – DBS Bank

Economists at DBS Bank remain bullish on the Internet sector despite recent sell-off, especially on online games and e-Commerce due to healthy revenue and earnings growth momentum. E-Commerce momentum is set to accelerate, led by robust e-Grocery demand and online games are set to grow on structural shift to higher ARPU games.

Key quotes

“Despite the recent correction in China’s Internet sector, we remain bullish as we see a lift in its growth ceiling led by structural changes post-COVID. The resurgence of COVID-19 and Lunar New Year travel restrictions should help to further accelerate the growth rates of online penetration. We prefer the online games and e-Commerce sectors due to strong growth in both top and bottom lines in the next 12 months. We see regulatory tightening as positive as this reduces sales and marketing costs by restricting competition.”

“The mobile game market is expected to accelerate 30.5% YoY in 2021 as leading platforms enter a stronger product launch cycle compared with 2020. Though time spent on mobile games is normalising post-COVID, revenue growth momentum remains resilient driven by the shift towards higher average revenue per user (ARPU) games. Tencent, with its strong pipeline of high profile games in 2021, is set to do well.” 

“China's e-Commerce market is expected to accelerate by 25% in 2021F in terms of gross merchandise value, according to iResearch. We expect online sales to have accelerated over the Lunar New Year, supported by subsidies given by local governments. is well positioned as its investment in leading community buying company, Xingsheng, is a positive move, and it has its own logistic network.”


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