SMARTPHONES: Sinking Smartisan Raises Cash, Xiaomi Defers IPO

Bottom line: Smartisan is likely to close or get sold by the end of this year, possibly to Meizu, while Xiaomi’s valuation is likely to fall by up to half when it returns to private investors for new funding with a year.

No near-term IPO for Xiaomi

A couple of fund-raising stories involving smartphone makers Smartisan and Xiaomi are in the headlines, reflecting in different ways the intense pressure each is feeling due to stiff competition that could soon claim a major victim. One headline has everyone buzzing over a recent share sale to raise cash by the founder of Smartisan, a highbrow niche brand set up by China’s most famous English teacher Luo Yonghao. The other has Xiaomi chief Lei Jun saying that his company may make an IPO in 2025, in what looks like a sarcastic response to a reporter’s question. Read Full Post…

IPOs: CR Pharma, Orient Securities Eye $1 Bln IPOs, Wanda Hits Resistance

Bottom line: Orient Securities IPO shares will debut flat due to weakness in China’s stock markets, CR Pharma will price stronger on good prospects for drug makers, and Wanda Commercial will have to raise its privatization buyout price.

CR Pharma files for HK IPO

After a quiet first half of the year, big IPOs for Chinese companies are suddenly coming to life in Hong Kong, though the outlook isn’t particularly strong. The latest headlines have China Resources Pharmaceutical filing for a $1 billion offering that was first mooted back in February, while the second has Oriental Securities pricing its own $1 billion offering near the bottom of its range. Meantime, a privatization bid for the Hong Kong-listed Wanda Commercial Properties (HKEx: 3699) has hit a stumbling block, with word that a major investor has objected that the buyout price is too low. Read Full Post…

INTERNET: Baidu’s Woes Grow, A China Opening for Bing or Yahoo?

Bottom line: Baidu will suffer more damage to its revenue and profits after new actions by China’s Cyberspace Administration, creating a potential opportunity for Bing or even Yahoo in China’s lucrative search market.

Baidu’s search woes offer opportunity for Bing, Yahoo

The woes for Internet search giant Baidu (Nasdaq: BIDU) continue, with word that China’s Internet censor is ordering the already hobbled company to cleanse itself of inappropriate sites in its search results. But whereas previous crackdowns have focused on politically sensitive content, this latest crackdown focuses on sites of companies that may be engaged in fraud or making inflated or bogus claims. The entire situation looks set to make a major dent in Baidu’s growth story, and could even see the company’s revenue shrink as it finds a new equilibrium. Read Full Post…

China News Digest: June 30, 2016

The following press releases and news reports about China companies were carried on June 30. To view a full article or story, click on the link next to the headline.
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  • China Resources Pharmaceutical Launches HK IPO, Aims to Raise up to $1 Bln (Chinese article)
  • Kuka (Frankfurt: KU2) Management Approves Sale to Midea (Shenzhen: 000333) (Chinese article)
  • Wanda Property (HKEx: 3699) Deal Faces Hurdles as APG Balks Over Price (English article)
  • China Appoints New Internet Regulator (English article)
  • Smartphone Maker Smartisan Founder  Pledges 2 Mln Shares to Alibaba (NYSE: BABA) (English article)

TELECOMS: US Keeps ZTE on Tight Leash, Eyes Huawei

Bottom line: Washington’s 2 month extension of a temporary license for ZTE to keep buying from its US suppliers indicates a final ruling is likely by year end in a similar probe against Huawei for illegally selling US products to Iran.

US extends export license for ZTE

After a tense period earlier this year when it appeared it could lose access to some of its key suppliers, telecoms equipment maker ZTE (HKEx: 763; Shenzhen: 000063) has been given continued access to those suppliers under a new extension of its earlier deal with Washington. The clash stemmed from a Washington ruling that ZTE sold US-manufactured telecoms equipment to Iran in violation of trade restrictions. Washington was set to punish ZTE by cutting it off from its many US suppliers, but later relented after the Chinese company agreed to cooperate with an investigation into the matter. Read Full Post…

BANKING: Goldman Eyes China Banks with Minsheng Bet

Bottom line: Goldman’s bet on Minsheng Bank could auger a new wave of foreign investment in depressed Chinese bank shares, on belief that Beijing will rescue the group before their bad debt becomes too heavy.

Goldman invests in Minsheng

After dumping shares of major Chinese lenders in droves after the global financial crisis, at least one major foreign investor is testing the waters again, with word that Goldman Sachs (NYSE: GS) has quietly built up a large stake in Minsheng Bank (HKEx: 1988; Shanghai: 600016). But this time Goldman’s move, which has seen it quietly buy 11 percent of Minsheng’s Hong Kong-listed shares, looks likely a pure investment play rather than a strategic tie-up. Read Full Post…

SMARTPHONES: Surging Huawei Set for Slowdown?

Bottom line: Reports of big sales target reductions could point to a looming slowdown for Huawei, as it tries to move out of low-end smartphones and into an increasingly saturated higher end of the market.

Huawei set for slowdown?

After posting phenomenal growth over the last year to become the world’s third biggest smartphone brand, China’s Huawei may be seeing a slowdown that’s reportedly prompting it to sharply cut its sales targets for this year. If the reports are true, the downward revision would mark a sudden reversal for Huawei, which has been posting sales growth in the 50-60 percent range since the middle of last year when its recent surge began. Such a shift would hardly be unprecedented in the fast-changing smartphone world, though it would come as a slight surprise since the company’s phones have become quite popular here in China, approaching the status of global superstar Apple (Nasdaq: AAPL). Read Full Post…

China News Digest: June 29, 2016

The following press releases and news reports about China companies were carried on June 29. To view a full article or story, click on the link next to the headline.
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  • Yum (NYSE: YUM) China Stake Sale Said Delayed as Suitors Miss Deadline (English article)
  • Pfizer (NYSE: PFE) to Invest $350 Mln in China Biotech Hub, First in Asia (English article)
  • Fosun (HKEx: 656) Plans to List US Insurer Ironshore ‘As Soon As Possible’ (English article)
  • ZTE (HKEx: 763) Says Temporary License Extended for Import of US Goods (HKEx announcement)
  • Qihoo 360 (NYSE: QIHU) Receives Update on Going Private Transaction (PRNewswire)

BUYOUTS: Autohome, Qihoo Spotlight Tough Road for Buyouts

Bottom line: Autohome’s attempt at a management-led buyout failed due to difficulties financing such a large deal, and Qihoo’s new attempt to finance its buyout with crowd funding-style tactics points to similar problems.

Ping An takes over Autohome boardroom

New developments in 2 of the biggest privatizations of US-listed Chinese companies are casting a spotlight on the difficulty many of these cases face, especially bigger deals that require billions of dollars in funding to succeed. The first case has the management team at online car specialist Autohome (NYSE: ATHM) losing its battle to take the company private, following a high-profile battle with its largest stakeholder. The second has software security specialist Qihoo 360 (NYSE: QIHU) reportedly turning to crowd funding-style tactics to try and raise money for its own buyout, hinting at financing difficulties for a privatization that values the company at more than $9 billion. Read Full Post…

E-COMMERCE: JD Joins Alibaba as Short-Seller Favorite

Bottom line: A spike in short-selling of China e-commerce stocks led by JD.com and Alibaba is cyclical and unrelated to their longer-term prospects, and a bounce-back is likely by year-end. 

Short sellers gobble up JD stock

It seems even a new partnership with global retailing giant Walmart (NYSE: WMT) can’t help sagging shares of JD.com (Nasdaq: JD), China’s second largest e-commerce company, which has recently become flavor of the day among short sellers. That’s the word coming from a new Bloomberg report, which says short seller interest in JD’s stock reached a record high in mid June, after already doubling over the previous month. This story isn’t really new, as I wrote about a similar short-selling boom for shares of JD rival Alibaba (NYSE: BABA) a couple of weeks ago also. Read Full Post…

TELECOMS: Telcos Fight Enterprise Voice Rivals, Regulator Resists

Bottom line: The MIIT should be commended for resisting pressure by China’s 3 telcos to ban free private voice services for enterprise customers, but should move quickly to show it will license such service providers like DingTalk and WeChat.

DingTalk halts free enterprise voice service

The ongoing battle between China’s big 3 state-run telecoms carriers and an emerging field of private sector challengers was in the headlines last week, when rumors emerged that the regulator was set to stop private firms from offering free voice services for business customers. The move looked set to potentially shut down popular services provided by Internet giants Tencent (HKEx: 700), Alibaba (NYSE: BABA) and others, before the regulator clarified that licenses were needed for companies to provide such voice services. (Chinese article) Read Full Post…