Greater consolidation expected in Chinese Internet, e-commerce: UBS

Consolidation will be the key word for Chinese Internet giants led by Baidu, Alibaba and Tencent, according to the latest research released by UBS Investment Research on Tuesday.

The consolidation has started in 2015 in the major segments such as taxi hailing, group buying, online travel and online classified information platforms.

UBS Investment Research shows that mergers and restructuring will be seen more frequently in the intensely competitive sectors, particularly in online to offline platforms.

The introduction of a strategic emerging industries board, and the recent liquidity boom in the A-share market resulting in a valuation gap between Chinese and US stock market will accelerate the privatization pace of more US-listed Chinese companies. A total of 34 such companies have received proposals to go private or were already being privatized by the end of 2015.

Strong momentum of growth can still be predicted for China's e-commerce market at a time when brick-and-mortar retailers' efficiency needs improving. E-commerce companies will invest more in logistics and online payment in 2016.

For online search companies, they need to seek cooperation with non-website information providers such as WeChat, for Chinese Internet users are becoming more mobile reliant.

Mobile games will still be the driving force for the growth of the overall online games industry. But mobile games will evolve to be heavier, which means that user viscosity will be increased and the value that one single game creates will be much higher.

The year 2016 will be a good year for online travel agencies as they are positioned well in a fragmented market. For those which have not made profits before, they will see a turning point in the next 12 years.