Latest / The Emerging Markets Podcast with Fexingo: Developing Economies, Growth, and Investment / How China's E-Commerce Giants Are Losing Ground in Southeast Asia
Transcript
- Lucas: Luna, I want to talk about something that's been gnawing at me as I look at the China internet stocks this week. Alibaba is down 11 percent in five days. JD down 9 and a half percent. PDD off 7 percent. The KWEB China internet ETF has shed 6.3 percent. Luna: That is brutal. And it's not just a bad day — it's a trend. The broader emerging market ETFs are also down, EEM off almost 4 percent in a week, VWO down 3 percent. But the China names are getting hit hardest. Lucas: Right. And the typical narrative is regulatory crackdowns, consumer weakness, deflation fears. All true to some degree. But I think there's a quieter, maybe more structural story underneath: Chinese e-commerce platforms are losing ground in Southeast Asia. Luna: Interesting. So this isn't just about the domestic China consumer — it's about their international ambitions hitting a wall? Lucas: Exactly. For years, Alibaba's Lazada and JD's investments in Indonesia and Thailand were seen as the next big growth engines. But homegrown players like Shopee — owned by Sea Limited — and even Tokopedia in Indonesia have been eating their lunch. And the data is starting to show it. Luna: Before we go deeper — you know, it's episodes like this that remind me why we keep this show free and ad-free. If walking through the economy with us has made something click for you, we do have a way you can support that choice. It's buy me a coffee dot com slash fexingo. No pressure, just mentioning it. Lucas: Yeah, absolutely. We don't run ads, and listener support is what keeps it that way. So if you find value in these conversations, that link is there. Now back to Southeast Asia. Luna: So what's the concrete evidence that Chinese platforms are losing share? Lucas: A couple of things. First, look at market share data in Indonesia — the largest e-commerce market in Southeast Asia. Shopee now commands over 40 percent of gross merchandise value there. Tokopedia, which is local, has about 30 percent. Lazada, Alibaba's platform, is down to around 15 percent. That's a huge shift from three years ago when Lazada and Tokopedia were neck and neck. Luna: And JD? They've been trying to build in Vietnam and Thailand. Lucas: JD has pulled back significantly. They closed their Indonesian operations last year essentially. Now they're focusing on a B2B logistics play rather than direct to consumer. But even in Vietnam, local platforms like Tiki are gaining ground. The Chinese model of massive subsidies to grab market share isn't working as well when locals have better logistics and payment integration. Luna: It's also about regulatory favor. Southeast Asian governments are increasingly protective of their domestic digital ecosystems. Indonesia requires foreign e-commerce platforms to set up local entities and comply with data localization rules. Vietnam has similar policies. Luna: That's a big headwind for Chinese companies that are already under scrutiny from Washington and Brussels. Lucas: Exactly. And it's not just regulation. The local players have built payment systems that are deeply integrated with local banks and mobile money. Shopee has ShopeePay, which is accepted everywhere. Lazada has struggled to get the same traction with Alipay cross-border. Luna: So what does this mean for investors looking at EM e-commerce? The KWEB is heavily weighted toward Alibaba, JD, PDD — but those are mostly China domestic stories. If you want Southeast Asia exposure, you might need to look at Sea Limited directly, or even local ETFs. Lucas: Right. The iShares MSCI Indonesia ETF, EIDO, is actually up slightly this week. While China ETFs are getting hammered. The divergence is telling. Investors are voting with their feet. Luna: But Sea Limited's stock has also been volatile — it's not a smooth ride. They've had profitability concerns. Lucas: True. Sea has had to cut costs and focus on profitability over growth. But the fundamentals of the market are strong. Southeast Asia has a young, mobile-first population with rising incomes. E-commerce penetration is still below 10 percent in many countries. The question is who captures that growth. Luna: And it's not just e-commerce. The entire digital ecosystem — payments, logistics, cloud — is being built by local champions. Grab in ride-hailing and delivery, GoTo in Indonesia. Chinese companies are being squeezed out of the platform layer. Lucas: That's the bigger story. The decoupling of emerging markets from China isn't just about trade and manufacturing. It's about digital services too. Five years ago, everyone assumed Chinese tech would dominate the developing world. Now it looks like local players are winning. Luna: And that has implications for how we think about EM investing. Maybe the old model of 'buy China for growth, buy Brazil for resources' is breaking down. Lucas: It's fragmenting. You have to be more granular. Vietnam is becoming a semiconductor link, as we've talked about. India is building its own digital payments stack. Southeast Asia is nurturing its own e-commerce champions. The one-size-fits-all EM thesis is over. Luna: So for our listeners who are watching the China internet bloodbath this week — is this a buying opportunity or a value trap? Lucas: I think it depends on your time horizon and your conviction about the domestic China consumer. If you believe China's economy will rebound and consumption will pick up, Alibaba at 11 times forward earnings might look cheap. But if you think the structural headwinds — demographics, regulation, geopolitical risk — are permanent, then even cheap stocks can get cheaper. Luna: And the Southeast Asian growth story might be a better bet for the next five years, even if it's not as cheap on a P/E basis. Lucas: Exactly. Shopee trades at a higher multiple, but it's growing revenue in the double digits and gaining market share. Alibaba is barely growing. The market is pricing in stagnation for China tech and expansion for Southeast Asia. That divergence is likely to continue. Luna: One more thing — the dollar is strong. The trade-weighted dollar index is at 120.4, up again this week. That's a headwind for all EM assets, but especially for countries that import a lot. Southeast Asian currencies have weakened against the dollar, which could squeeze margins for e-commerce players that import goods. Lucas: Good point. But local platforms have an advantage there too — they source more goods locally. Chinese platforms relied more on cross-border shipping, which gets hit by currency and tariff issues. Luna: So the takeaway: the China internet selloff is partly about domestic issues, but partly about a structural shift in Southeast Asian e-commerce away from Chinese players. Lucas: I think that's right. And for investors, it means rethinking the old EM playbook. The growth stories are becoming more local, more fragmented, and more competitive. You can't just buy the China ETF and call it emerging markets exposure anymore. Luna: All right, plenty to chew on. Thanks, Lucas. Lucas: Thanks, Luna. Talk to you next time.