Both emerging market and developed market technology firms have been a detractor to performance for the Antipodes Global fund as the firm questions the growth of Alibaba and Facebook.
In an update, the firm said Facebook, which was the fund’s largest weighting at 3.6%, had been the largest detractor from performance during January.
“Online services in developed markets, notably Facebook, [was a detractor] on cautious guidance around growth in the second half of 2021 and uncertainty around Apple handset users being able to ‘opt out’ of data sharing,” Antipodes said.
“The impact is likely to be small and expected to be more than offset by continued healthy engagement trends and opportunities to increase monetisation.”
Earlier this year, Munro Partners highlighted a similar issue and said it was watching Facebook closely over its regulation issues.
This followed China tech giant Alibaba being the Antipodes fund’s largest detractor during the three months to 31 December 2020. Shares in the company fell 15% during the quarter as founder Jack Ma disappeared from public life after an initial public offering of Ant Group was blocked by the regulator and it was the subject of an anti-trust investigation.
“Alibaba, online services Asia/emerging markets cluster, [was a detractor] on anticompetitive policies announced by the Chinese regulator. While this may affect growth rates, the impact is likely to be mitigated by an increase in competition with the emergence of many new platform.
“The long-term outlook for Chinese internet/e-commerce remains attractive given opportunities to increase penetration in lower tier cities, expand into new categories, and in digital advertising where ad penetration lags most markets.”
However, the firm said it remained positive on Chinese tech over the long-term as there were plenty of future opportunities for e-commerce growth. It highlighted stocks JD.com and Tencent as those which were less exposed to regulatory scrutiny than Alibaba. The global fund already had a 2.6% weighting to Tencent and said a tech partnership it made with automaker Geely around autonomous driving had contributed positively to performance.
“We remain positive on the long-term outlook for Chinese internet companies given opportunities to increase ecommerce penetration in lower tier cities, expand into new categories such as fresh food and grocery, and in digital advertising where ad penetration lags most markets.
“In this context JD.com and Tencent are well positioned and relatively less exposed to regulatory scrutiny than Alibaba. With its ‘1P’ business model JD is making inroads into grocery/FMCG, while Tencent’s online gaming business has already come under regulatory scrutiny and online advertising will benefit from continued economic recovery in China.”
