JPMorgan analysts believe they’ve developed a strategy for selecting Chinese stocks based on futuristic concepts, such as the metaverse.
The metaverse is a virtual platform where users are able to interact with other individuals via three-dimensional avatars. The platform has demonstrated huge potential for success and some have even described it as “the next generation of the internet”.
However, user engagement in the United States isn’t currently meeting analysts’ expectations. Industry leaders, such as Meta, rely on momentum driven by the metaverse to maintain the value of their shares, which are down more than 50 percent this year.
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Consumer adoption is also a concern for Chinese-based companies. However, metaverse development within China is restricted by an unique set of government-implemented regulations, as noted by a JPMorgan analyst in his Sept. 7 report. This includes a country-wide ban on cryptocurrency, which is a major element of the metaverse outside of China.
Despite this set back, stock analysts have identified that some Chinese internet companies have been able to profit from certain metaverse-driven industry trends. For example in the cases of Tencent, NetEase, Bilibili, and non-internet companies such as Agora, China Mobile, and Sony. JPMorgan analysed these companies’ competitive advantage in particular metaverse areas, such as gaming and social networking.
Analysts have also predicted that as user engagement in the metaverse increases, “the amount of digital time spent will double from 6.6 hours to 12 hours. Companies are also expected to generate more revenue per internet user.
According to JPMorgan, China will have a USD 27 billion market for business services and software in the metaverse, while digitalizing offline consumption will result in a USD 4 trillion market.