Brand name, competitiveness key to tech stocks
The strong performance of various major US tech stocks, including those of Apple, Microsoft, Google, Amazon and Netflix, has many Hong Kong investors wondering whether it would make more sense to have their money parked there than in locally-listed H shares of Chinese mainland tech enterprises.
Apple’s stocks, for instance, are expected to make big gains, fanned by the company’s big show on Monday when it introduced new versions of the operating systems of its various devices which are said to have made significant improvements on previous ones. The tech behemoth is likely to make an even bigger splash when it launches new iPhone models — its strongest cash cow — later this year.
The advantages enjoyed by such tech giants are their global presence. Their products and, more importantly, services, have come to dominate not only the US, but European and other markets.
Mainland tech companies have also seen explosive growth in the past decade or so due to rapidly surging demand in their domestic market. But, their global presence is largely limited to the developing economies where consumers’ spending power is considerably weaker.
To be sure, some mainland equipment manufacturers, especially major mobilephone makers, have made inroads in Western markets. But, their market shares were secured through price competitiveness rather than brand recognition. This is seen to have put severe constraints on their capability to widen profit margins which, according to a leading mainland phone maker, have stayed around 5 percent.
Also, growing concern about privacy in Europe and the US could hamper sales of products and services of mainland tech companies that have fallen behind Apple and some other competitors in their bid to establish a reputation for privacy protection.
The latest revamp in Hong Kong’s rules allowing dualshare listings has opened the door of the local stock exchange to an anticipated influx of mainland technology enterprises. Their shares will have to be competitively priced against those of their US counterparts to attract global investors.