Before getting into financials, some may ask the question of “why bother”?
My thoughts below:
1/ These companies are customers of other global companies.
e.g. gaming companies or PDD shall purchase ads on Meta & Google
e.g. internet companies shall purchase general server chips like Intel, AMD.
2/ These companies serve a market that US firms are not directly serving
Debatable. But the current reality is that Chinese internet space is mostly Chinese companies.
3/ Sanctions?
I view it less likely than before. US and China are trying to stablize ties.
It’s hard to have direct monetary impacts as they mostly serve the domestic market. What to gain from more sanctions?
Some companies are very careful overseas and do comply with local laws, e.g. Tencent’s subsidiary Supercell did pull out of Russia market.
4/ Domestic regulations?
Less likely in the near-term. Most previous restrictions are no longer there. Didi back to app stores, some after-school education is back, draft on more game regulation is stopped.
Weak macro protects these companies. Less disruption is good.
Plus, they do have growth, have become leaner, and are not expensive.