INTERNET: China Internet Tycoons Creep Up On Li Ka-shing
Bottom line: China’s “Big 3” Internet tycoons are likely to see their fortunes continue to grow at rates far faster than the broader economy over the next year, and they could even overtake some wealthier real estate magnates.
Hong Kong’s Li Ka-shing may still lead the list of wealthiest men in China and Hong Kong, but his traditional formula for success is rapidly losing ground to China’s fast-rising Internet magnates. The heads of China’s “Big 3” Internet firms were all among the top 10 people on this year’s just-published Forbes list of the wealthiest men in China and Hong Kong, spotlighting the huge role that the Internet is playing in China’s economy. Whereas Li’s fortune took decades to build, the founders of Alibaba (NYSE: BABA), Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU) made their fortunes much more quickly, mostly over the last decade.
Of course the big question will be whether people like Alibaba’s charismatic founder Jack Ma will be able to keep their places near the top of the China rich list, or whether their companies might stumble and lose some of their luster for investors. I would be willing to guess that at least one of the Big 3 will get tripped up over the next decade, though I’m not bold enough to predict which one of these giants might be first to fall.
All that said, let’s look more closely at the latest Forbes list and try to figure out what it might say about the future of Alibaba’s Jack Ma, Tencent’s Pony Ma and Baidu’s Robin Li. We should start off with Hong Kong’s own richest man, Li Ka-shing, who tops this year’s Forbes China and Hong Kong rich list with a fortune worth $33.3 billion. (Chinese article) That figure is certainly huge, though it grew by a relatively modest 7.4 percent from last year.
Alibaba’s Jack Ma led the Chinese Internet pack with a fortune worth an estimated $22.7 billion, according to Forbes. That was enough to make him the fourth richest man in China and Hong Kong. Second and third places on the list went to 2 other real estate magnates, Hong Kong’s Lee Shau-kee and the mainland’s Wang Jianlin. But Ma’s fortune saw some of the biggest growth over the last year, more than doubling to its current level following the huge success of Alibaba’s New York IPO last September.
Tencent’s Pony Ma was the second wealthiest Chinese Internet magnate with an estimated fortune worth $16.1 billion, enough to make him the 6th richest man in China and Hong Kong. Like Jack Ma, who is no relation, Pony Ma’s fortune also more than doubled over the last year as Tencent’s stock soared on the huge success of its QQ and WeChat social networking (SNS) platforms.
While Jack Ma and Pony Ma both galloped ahead at lighting speed, progress was a bit slower for Robin Li at Baidu, which has always been a distant third to the more dynamic pair of Alibaba and Tencent. Alibaba and Tencent both have market valuations of roughly $200 billion, versus Baidu’s sizable but still much smaller $75 billion. Robin Li’s fortune came in at $15.3 billion, making him the 8th wealthiest man on the list. But that figure was up a more modest 40 percent from last year, and Li was actually overtaken by both Jack Ma and Pony Ma during the year.
One other noteworthy tech magnate on this year’s list was Lei Jun, co-founder and chief executive of Xiaomi, which has become the world’s third largest smartphone maker just 5 years after its founding. Forbes pegged Lei’s fortune at $13.2 billion, making him China’s 13th richest man. (Chinese article) That fortune comes not only from Xiaomi, which was valued at about $10 billion at the start of this year, but also from his earlier investments in software maker Kingsoft (HKEx: 3888) and its US-listed security software unit Cheetah Mobile (NYSE: CMCM).
So, what kind of conclusions can we draw from all this, and where are these tech titans likely to be at this time next year? It’s no coincidence that the top 3 members of the overall list all made their fortunes in real estate, as China’s and Hong Kong’s real estate markets have boomed over the last decade. But that boom is showing growing signs of sputtering, and we can probably expect to see the fortunes of Li Ka-shing and the other 2 stall or even start to fall as the market heads into a much-needed correction.
The Internet stocks may also be ready for a pause due to their high valuations, though any corrections will likely be less severe and shorter. At the end of the day there’s still huge growth potential for these companies as China opens up many traditional sectors like banking and energy to private investment. That should provide a steady stream of new opportunities for these tech giants, and I would expect to see the fortunes of all of these Internet magnates grow significantly faster than the broader market over the next year.
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