That’s because Tencent and Alibaba had become so powerful that it likely hindered innovation in many areas.
For example, TenPay and AliPay (Ant Group’s payment app) made up nearly 95% of all online payment transactions – with the split between the two being 39% and 55%, respectively, by value.
Returns will likely disappoint
While investors in China’s big tech giants have had it good over the past decade, the next 10 years aren’t likely to be as rewarding.
For one, they’re already giants. Tencent boasts a market cap of US$560 billion and with margins likely to fall in the coming years as sectors open up to competition, it’s not in a position to keep growing at the pace it was.
However, Tencent is still in a better position than Alibaba – which operates in the fiercely competitive Chinese e-commerce space and has to fend off competitors such as Meituan Dianping (SEHK: 3690) and Pinduoduo Inc (NASDAQ: PDD).
Meanwhile, Tencent has a strong international gaming business, a long track record of producing hits and lucrative stakes in numerous international tech companies such as Tesla Inc (NASDAQ: TSLA) and Snap Inc (NYSE: SNAP).
Overall, though, investors will be better off finding Chinese investment opportunities in the mid-cap space, where companies are likely to benefit from the lack of an overbearing tech duopoly, as well as in the domestic A-shares market.
Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.