2012 Outlook

Deutsche Bank Markets Research Asia china Technology Industry Date chinaware Internet 09 January 2012 Industry Update Alan Hellawell III Softw atomic account 18 & Services 2012 outlook; BIDU & SINA as top picks 2012 sector view and stock picks Among 3 pillars of china Internet economy (e.g. online ads, online looseness and ecommerce), we believe online ads is still in secular emergence stage while online gaming is maturing. We stomach online ads to maintain robust growth in 2012 driven by 1) budget shift from offline to online media 2) govt regulation on TV ads. Online gaming continues to face pressure from usage shift to SNS and online video, making monetization difficult. B2B ecommerce will be under pressure from both ambitious macro environment and Alis business model transition. Our top picks are Baidu and Sina Sector valuation attractive after bruising 2011 Chinas internet sector last year on average lost 29% in value (Hang Seng 20%, NASDAQ 1.8%). Some of the sectors higher quality name calling currently trade at particularly attractive levels on a PEG basis (e.g. Baidu at 0.7x), this in the midst of consistent earnings upgrades.

Online ads: budget shift from offline continues Despite Chinas still TV-dominated ad market, we bear digital ads, particularly internet ads, to continue to take market share from TV over the next several years. Among digital ad channels, we take care search, video and social ads to gain share faster than different channels. Online games: lack of major game launches, MMO growth slowdown We previse overall online game growth to gradually slow in the next several years, due specifically to a growth slowdown in MMORPGs. Nonetheless, social games and web-games should continue to grow quickly. We sojourn listed gaming operators on average to grow 25%. This tax income slowdown is largely due to a smaller number of big title launches in 2012 vs. 2011. Stripping out Tencent, we expect the rest of the gaming operators to grow 17% in 2012. Online... If you essential to get a full essay, order it on our website: Orderessay

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