Bottom line: CCTV’s new attacks on LeTV and JD.com reflect its growing assertiveness to counter the rise of new media, and could become more frequent in the months and years ahead.
The rapid rise of new media is posing a serious challenge to China’s traditional media, which is perhaps partly behind a couple of headlines that have state-run broadcasting giant CCTV leveling separate attacks against online video high-flyer LeTV and e-commerce giant JD.com (Nasdaq: JD). The first case has seen CCTV sue LeTV for copyright infringement related to its popular Lunar New Year’s eve TV program. The second has CCTV airing an investigative report accusing JD.com of offering refurbished iPhones over its site that used unauthorized components, causing some to break down. Continue reading →
Bottom line: Beijing should step in to mitigate the latest cutthroat competition in the smartphone and hired car services spaces, or risk seeing meltdowns that lead to chaos and job losses.
New battles broke out in 2 of China’s most hotly contested high-tech sectors last week, casting a spotlight on the aggressive and even potentially illegal tactics that Chinese companies sometimes use in their fierce rivalries and quest for market share.
One of those saw taxi app operator Didi Kuadi announce a major promotion offering aggressive subsidies for its hired car services. The other saw video high-flyer LeTV (Shenzhen: 300104) use equally aggressive tactics to launch its new line of smartphones, igniting a war of words after another prominent rival criticized its actions as “irrational”. Continue reading →
Bottom line: The strong reception for Huaitai Securities’ Hong Kong IPO reflects growing international investor appetite for Chinese stocks, which could help to lift shares of New York-traded Chinese companies like newly listed Baozun and eHi.
A flurry of IPO news is reflecting the growing attraction of listing closer to home for Chinese firms, whose New York-traded shares have languished these days due to lack of familiarity by local investors. Two new US-based listings have performed reasonably well but not spectacularly, led by modest gains for newly listed shares of web design services firm Baozun (Nasdaq: BZUN) in their trading debut. At the same time, recently listed rental car company eHi (NYSE: EHIC) raised a modest amount of money in a secondary offering, again reflecting tepid investor interest in its story.
While those 2 listings got so-so receptions, the response was far stronger for Huatai Securities, China’s fourth largest brokerage, whose shares priced at the top of their range as Hong Kong investors scrambled to buy into the mainland’s ongoing stock market boom. Continue reading →
Bottom line: Ctrip’s purchase of a controlling but minority stake in eLong is the latest in a string of similar equity tie-ups by the company, none of which looks very exciting because these new partners aren’t interested in working closely with Ctrip.
A longtime but largely empty cross-border Internet partnership has finally come to an end, with word that US online travel agent Expedia (Nasdaq: EXPE) has dumped its stake in Chinese laggard eLong (Nasdaq: LONG). In an interesting twist to the story, the group buying eLong includes Chinese industry leader Ctrip (Nasdaq: CTRP), which seems to be buying small stakes in many of its rivals these days without buying anyone outright.
Personally speaking, I don’t see much reason to get excited about Ctrip’s latest buy, even though investors seemed to think differently. eLong is a perfect example of a company that had huge advantages due to its early arrival to the online travel market and longtime partnership with Expedia. And yet it failed to parlay any of that into a market leading position, and instead has become an afterthought as it got overtaken by younger, more innovative companies like Tuniu (Nasdaq: TOUR) and Qunar (Nasdaq: QUNR). Continue reading →
Bottom line: Rupert Murdoch’s shift in China strategy towards less controversial retail and entertainment projects looks smart, but is likely to meet with lukewarm success due to lack of awareness of 20th Century Fox among Chinese consumers.
Rupert Murdoch just can’t seem to ignore the China story for too long, with new reports saying his Twenty-First Century Fox (Nasdaq: FOX) is finalizing plans for a theme park in a country that has been quite elusive for the aging media mogul. The theme park approach certainly looks safer than Murdoch’s previous attempts to enter China with more traditional media like TV and movies, and mirrors what some of the world’s other top media companies have done. Of course that means Murdoch and Fox are coming a bit late to this particular show, and the fact that 20th Century Fox theme parks aren’t exactly a well-known brand means his media empire could face a steep uphill ride finding a Chinese audience. Continue reading →
The following press releases and media reports about Chinese companies were carried on May 23-25. To view a full article or story, click on the link next to the headline.
Expedia (Nasdaq: EXPE) Announces Sale Of eLong (Nasdaq: LONG) Stake (PRNewswire)
Bottom line: HP’s choice of a Beijing-based group with strong ties to a top science university as its China IT services partner looks like a smart move, which will help ease potential for conflict over national security concerns by Beijing.
Hewlett-Packard (NYSE: HPQ) has chosen a relatively dynamic, Beijing-based tech company as its future China partner over a stodgier state-run firm in Shanghai, as the US computer giant prepares to split itself into 2. The development is seeing HP get a bit less money than it had hoped for the 51 percent stake of its China-based H3C unit, which makes equipment for use in small telecoms networks. But the choice of Tsinghua Unigroup as the buyer looks quite prudent, and will bring in a new politically connected partner for HP as it prepares to split off its core PC unit from its more dynamic business that sells computing and networking services to enterprises. Continue reading →
Bottom line: Bank of China’s plan to create a Southeast Asian unit around its Hong Kong-based BOCHK looks like a smart move that will give investors a chance to buy shares of its more commercially-focused global operations.
Chinese banks have always been a difficult investment option for westerners due to their heavy reliance on China, where they take orders from Beijing leaders that use them as an economic policy tool rather than letting them act like real commercial lenders. The banks’ international operations are more interesting from an investor’s perspective, as they tend to behave more commercially because they have to competite in markets where they don’t enjoy any special government-granted advantages.
The problem is that international operations are usually just a tiny business for most of the big Chinese banks, even as industry leaders ICBC (HKEx: 1398; Shanghai: 601398) and Bank of China (HKEx: 3988; Shanghai: 601988) spend billions of dollars on offshore acquisitions and other overseas expansion. That’s why a new plan by Bank of China looks particularly exciting, as it will finally give stock buyers an option to invest exclusively in the company’s offshore operations, in this case in Hong Kong and Southeast Asia. Continue reading →
Bottom line: LeTV’s strong smartphone launch shows that stiff competition in China won’t ease soon, which could push Lenovo’s mobile operations further into the red and prompt ZTE to further lighten its efforts in the market.
A series of smartphone items are in the headlines as we close out the week, spotlighting the tough situation in a China market that is at once the world’s largest but also extremely competitive. That competition just got a bit louder, with the first headline that says new arrival LeTV (Shenzhen: 300104) debuted quite strongly with when its first smartphone models went on sale this week. Meantime, industry stalwarts Lenovo (HKEx: 992) and ZTE (HKEx: 763; Shenzhen: 000063) continue to reflect the stresses of selling in China, with the former posting a big loss for its mobile business last year while the latter continues to lighten its reliance on the market by looking for growth in the US. Continue reading →
The following press releases and media reports about Chinese companies were carried on May 22. To view a full article or story, click on the link next to the headline.
Tsinghua Unigroup To Buy 51 Pct of HP’s (NYSE: HPQ) H3C For $2.5 Bln or More (Chinese article)
Bank Of China (HKEx: 3988) Weighs Overhaul For BOCHK (HKEx: 2388) Unit (HKEx announcement)
Bottom line: Online real estate stocks could resume their rebound if their latest forecasts are accurate, while Youku Tudou shares are holding steady despite widening losses on hopes for a merger deal with iQiyi.
This week marks the height of earnings season for US-listed Chinese stocks, prompting me to look at a quartet of struggling companies in the real estate and online video spaces that have just reported results. The former category has seen the trio of SouFun (NYSE: SFUN), E-House (NYSE: EJ) and Leju (NYSE: LEJU) all release their earnings over the last 2 days, revealing gloomy results as an ongoing correction shows no signs of easing in China’s real estate market. Meantime, former online video leader Youku Tudou’s (NYSE: YOKU) latest results also look weak, showing the company’s losses ballooned as it continues to search for an elusive model for long-term profitability. Continue reading →