Merrill says Pacific Century Cyberworks is top pick!
Merrill sees sustained growth in `Year of IPO'
By Eunice Wong
STORY: ECONOMIC recovery in Asia is providing enough demand to drive sustainable revenue growth and capital funding for the emerging Internet businesses across the region, according to Matei Mihalca, head of Asia-Pacific Internet research at Merrill Lynch.
``Nineteen-ninety-nine was the Year of the Internet in Asia,' Mr Mihalca said in a report. ``The focus on portals should continue in 2000, which we expect to be the Year of the IPO.'
Listings should include leading portals from across Asia, he said.
Reviewing the existing universe of Asian Internet and Internet-related companies, Mr Mihalca said there was a small but growing number of dedicated Asian Internet companies traded on local or overseas exchanges. There would be about 20 to 25 IPOs in the Nasdaq market this year, he said.
About 10 to 15 Hong Kong companies would list on the Growth Enterprise Market or the main board this year, he predicted.
Mr Mihalca said the learning process of the Internet in Asia would be shorter than that in the US, but this journey had just begun and there were a lot of territories not yet explored.
For Asian investors, Mr Mihalca advised that those wanting to capitalise on the spectular growth of Internet-related stocks should look beyond portals, which were heavily advertising-dependent. Instead, he explained, investors should focus on companies that make full use of the interactive character of the Web.
``We believe investors are increasingly favouring so-called `clicks and mortar' business models or online/offline hybrids, as exemplified by the recent AOL-Time Warner merger.
``Chinadotcom, perhaps the best-known Asian Internet company, is de-emphasising its portal offering in favour of its Web solutions and advertising network businesses. This is arguably more `real world',' Mr Mihalca said.
Of all the Asian Internet markets, Merrill Lynch likes Korea best on account of Web development, strong advertising, large population and per-capita wealth. ``We believe Taiwan may be the next. To conclude, India, China and Korea are the countries we are most interested in,' Mr Mihalca said.
The Internet wave began with business-to-consumer models, but Merrill Lynch believes its second wave, just beginning, is business-to-business. Asia is developing business-to-business e-commerce almost in tandem with the US.
Meanwhile, Pacific Century CyberWorks is Merrill's top pick in the ``pure' Internet space, as a one-stop-shop of Asian Internet exposure. In the property sector, Merrill Lynch recommends Sun Hung Kai and Cheung Kong as the best-placed Internet plays.
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