THIS MATERIAL IS A MARKETING COMMUNICATION.
China Embraces the Cloud Computing Age
Cloud Computing Age
The term “cloud computing” describes the storing and accessing of data and software using remote servers, and it’s one of the fastest-growing sectors of the IT industry.
Most personal computer users are already familiar with the concept of storing files or photos online instead of on internal hard drives. For businesses, the concept is the same, and it offers multiple advantages.
Firstly, it’s a lot cheaper. A company can save up to 30% of its IT costs by switching from on-site data management to cloud services. And the benefits extend far beyond just storage. Once a company’s IT resources have been moved to the cloud, there is a growing universe of big-data and artificial intelligence tools that can help enterprises develop their commercial strategies. Cloud computing provides the scalable resources to gather, analyse and store all kinds of data for a variety of advanced applications, such as sales analysis or personalised services for customers.
SaaS MARKET: US VS CHINA
CHINA CLOUD COMPUTING MARKET SIZE
What’s more, unlike traditional on-site IT services, cloud computing generates recurring revenue, making it a more predictable, service-oriented business model.
According to technology research firm Canalys, worldwide spending on cloud computing accelerated to more than USD80 billion in 2018, from USD55 billion the year before1.
Having a big-data strategy is increasingly seen as essential for all corporate management activities. The ability to identify and respond to consumers is now a key factor in measuring enterprise competitiveness, and cloud tools offer the best and most cost-effective means of leveraging the vast amounts of data that companies generate.
Cloud companies, especially first movers, already benefit from economies of scale and network effects, and there is no sign of those advantages being eroded. Growing use of the public cloud creates greater demand for scale, as we have seen with companies such as Amazon and Alibaba.
Cloud Computing in China
For investors, it’s important to know that China is still in the early stages of this global trend and is racing to catch up, meaning its cloud market not only has much greater room for expansion, but at a faster pace. While its enterprise IT market is enormous, the proportionate share of cloud computing remains relatively low. According to Bain, it stands at about 5% of the total market, compared with the global average of 11%2. Further, its cloud software industry is only 3-10% of the size of its US counterpart, yet China’s GDP is 70% of the US’s.
As a result, Bain expects China’s spending on the cloud to grow as 40-45% a year, reaching USD20 billion in 2020, far outpacing the broader IT industry. The Chinese government has identified cloud technology as a strategic priority – it was a prominent feature in both its 12th and 13th Five-Year Plans3. Thus, the sector is expected to receive a significant boost from government policies promoting and subsidising cloud technology adoption, such as the 20% support offered to companies to help them switch to the cloud.
In addition, China’s state-owned telecom companies invested approximately USD180 billion between 2015 and 2017 in fixed-line and wireless connectivity to support Internet access and cloud services.
Investing in the IT sector, as we already know, can be a bumpy ride. The internet sector, in particular, is still relatively young, and prone to sudden changes in government regulations and restrictions that can affect business practices, operational costs, user growth and development speed. The industry also has to deal with unpredictable spurts and slowdowns in growth, and frequently fierce competition for top talent.
IT is a fast-moving business, and companies at the forefront of technology today can find their products and services becoming rapidly obsolete – and their share prices following suit – if they don’t continually evolve (think 3D printing companies a few years ago). Software errors, bugs and vulnerabilities can also rapidly decimate consumer confidence in a product.
Nevertheless, investors have already begun catching on to growth potential of cloud computing in China. In the 12 months through the end of July 2019, the Solactive China Cloud Computing NTR Index (the underlying index for the Global X China Cloud Computing ETF) rose 12% in the 12 months through August 2019, almost double the gain in the Shanghai Composite Index.
Global X China Biotech ETF (2820 HKD / 9820 USD)
This document contains the opinions of Mirae Asset Global Investments (HK) Limited (“MAGIHK”) and is intended for your use only.
It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument and shall not constitute any form of regulated financial advice, legal, tax or other regulated service. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. MAGIHK makes no representation as to their accuracy or completeness and therefore do not accept any liability for a loss arising from the use of this document.
All Investments contain risks. Forecasts, past information and estimates have certain inherent limitations. Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these opinions are suitable for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.
Past performance is not a guarantee or a reliable indicator of future results. Before making any investment decision, investors should read the applicable fund prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the applicable investment and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice if in doubt.
This document is issued by MAGIHK (Licensed by the Securities and Futures Commission for Types 1, 4 and 9 regulated activities under the Securities and Futures Ordinance). This document has not been reviewed by the Securities and Futures Commission and no part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of MAGI HK.
Staying Ahead with Mirae Asset’s Latest Insights
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KIIDs”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KIIDs can be obtained from www.am.miraeasset.eu/fund-literature/ . The Prospectus is available in English, French, German, and Danish, while the KIIDs are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KIID before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary/.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Hong Kong: This document is intended for Hong Kong investors. Before making any investment decision to invest in the Fund, Investors should read the Fund’s Prospectus and the information for Hong Kong investors (of applicable) of the Fund for details and the risk factors. The individual and Mirae Asset Global Investments (Hong Kong) Limited may hold the individual securities mentioned. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Copyright 2021. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.