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China's Internet sector took a beating in 2021, mostly due to regulatory tightening. In 2022, expect less surprise in the market as Internet companies hold more frequent dialogues with regulators. The government will likely shift its focus to stabilise the economy and the e-commerce market is projected to grow 17% this year.
We prefer food delivery and e-commerce in comparison to other internet subsegments as demand remains robust and regulatory risks have been mostly priced in.
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E-commerce
We like JD.com most, as it is a beneficiary of new antitrust law, and will deliver stronger e-commerce growth than the market.
The company is building platforms to target to the large potential user base in lower-tier cities, and is currently outperforming the overall e-commerce segment.
Food delivery
Meituan has a leading market share of 70% in terms of GTV.
Meituan gained market share from 67% to 70% last year, supported by the growing number of merchants, superior city-based operation, and a strong presence in lower-tier cities which represent 46% of total food delivery user base.
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