3 Key Takeaways From CLSA's China Trip

James Lee of CLSA finalized a fact finding channel check mission in China involving cross-border trade e-commerce activity.

As a whole, the analyst noted that he came away incrementally positive on Facebook Inc FB for its "opportunity to follow the successful product roadmap of WeChat."

On the other hand, the analyst saw mixed data points on Amazon.com, Inc. AMZN and negative data points for eBay Inc EBAY.

Facebook

Lee met with ad agencies in China to discuss WeChat and the overall mobile messaging segment in China.

Related Link: Facebook To Roll Out Messenger Platform Version 1.2

Lee noted that WeChat "provides a product roadmap" for Facebook Messenger, especially for Brand Accounts that facilities commerce, advertising and payments. Moreover, monetization rates for mobile messaging in China is "attractive," as the analyst estimates revenue per monthly active user is $6, and Facebook could achieve the same level over time.

Amazon

Based on Lee's channel checks, cross border trade has slowed down following an increase in import taxes in China back in April. Categories including cosmetics, baby products and consumer electronics saw a 30 percent drop in gross merchandise volume.

Lee suggested that this decline could be temporary in nature, as consumers are holding back on purchases to adjust for the price increase or reallocating demand to the unofficial purchasing agency. As a reminder, Amazon Global Store has a 10 million SKU (stock keeping unit) count in China, which is superior to T-Mall Global and JD Global that hold just 4 million SKUs each.

eBay

Lee's checks indicated that eBay is facing "increased competition" for its China export business. Of note, Amazon is offering Chinese merchants a preference to the Buy Box and it has also ramped up its Chinese export business from $2 billion to $3 billion in gross merchandise volume, which is nearly 40 percent of eBay's level.

As such, the analyst concluded that eBay's cross border trade could be "vulnerable" and create upside to his forecast for Amazon.

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