TELECOMS: HP Picks Beijing Group As China IT Partner

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.

HP choses Unigroup as China IT partner

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

BANKING: Bank Of China Creates SE Asia Play

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.

Bank of China to create separate SE Asia unit

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

CELLPHONES: LeTV Sells Out, Lenovo Posts Loss, ZTE Eyes US

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.

LeTV smartphones make strong debut

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

News Digest: May 22, 2015

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)
  • Lenovo (HKEx: 992) Reports Results For Quarter Ended March 31 (HKEx announcement)
  • Online Long-term Apartment Rental Platform Mofang Wins $200 Mln Funding (English article)
  • ZTE (HKEx: 763) Seeks More NBA Partnerships To Boost US Smartphone Sales (English article)
  • Latest calendar for Q1 earnings reports (Earnings calendar)

INTERNET: Online Real Estate, Video Struggle For Profits

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.

Online real estate stocks drop on weak earnings

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

NEW ENERGY: Yingli’s New Deadline, Hanergy’s Plunging Value

Bottom line: Yingli’s shares could rebound a bit as concerns ease about an imminent bankruptcy, while Hanergy’s shares are likely to continue sliding when trading resumes to correct from a massively speculative recent run-up.

Hanergy shares tumble

This week has been a volatile time for solar company stocks, which have taken a beating after Yingli (NYSE: YGE) warned about its ability to stay in business due to its heavy debt load. Now Yingli has put out a new statement saying its earlier warning was misinterpreted, helping to reverse a huge sell-off of its shares as it laid out the next big deadline in the struggle to repay its debt.

At the same time, Hong Kong-listed solar equipment maker Hanergy (HKEx: 566) has also been in global headlines, after its shares lost nearly half their value in just a matter of minutes in Wednesday trade. Media are focusing on the huge price swing, which no one seems able to explain. But this really looks like a story of stock manipulation by speculators rather than one of any significant change in the company’s prospects, which once again underscores the dangers of dealing in this kind of thinly-traded stock. Continue reading

CELLPHONES: Rapid Slowdown Pushes Xiaomi To US, Europe

Bottom line: Xiaomi’s rush into competitive western markets with beta testing of new online stores hints at internal concerns over the company’s rapidly slowing growth, and is likely to meet with a lukewarm reception.

Xiaomi eyes US, Germany, France, UK

The upwardly mobile Xiaomi is making its latest moves on the global stage, with word that it’s beta testing online stores in the US, France, Britain and Germany. The planned move into the US was previously disclosed earlier this year, with reports that Xiaomi would start by selling accessories like earphones. (previous post) But this addition of 3 major Western European markets hints that Xiaomi is moving ahead aggressively with its global expansion, and could even start selling its signature smartphones in some or all of those markets by year-end.

Xiaomi is accelerating its move into these lucrative but also highly competitive new western markets as it comes under growing pressure to maintain its breakneck growth that has given it a rich valuation of $45 billion just 5 years after its founding. That pressure is evident in a second headline, which says Xiaomi’s smartphone sales rose by just 50 percent in this year’s first quarter, far less than the triple-digit growth rates it has become used to in its relatively short life. Continue reading

News Digest: May 21, 2015

The following press releases and media reports about Chinese companies were carried on May 21. To view a full article or story, click on the link next to the headline.

  • Microsoft (Nasdaq: MSFT) Xbox One Gets $100 Price Drop in China to Boost Sales (English article)
  • Disney (NYSE: DIS) Opens Its First And Largest Store In The World In Shanghai (Businesswire)
  • Yingli (NYSE: YGE) Responds To Media Coverage Of Its Ability As a Going Concern (PRNewswire)
  • Youku Tudou (NYSE: YOKU) Announces Q1 Unaudited Financial Results (PRNewswire)
  • Solar Maker Hanergy (HKEx: 566) Plunges, Losing Nearly $19 Bln in 24 Minutes (English article)
  • Latest calendar for Q1 earnings reports (Earnings calendar)

INTERNET: Car Giant Rises In Uber-Baidu-Yidao Yongche Tie-Up

Bottom line: A Yidao Yongche merger with Uber China continues the rapid consolidation in China’s hired car services, which could be followed soon by a successful bid by Uber and Baidu for Nokia’s digital mapping division.

Yidao Yongche to merge with Uber China

Rapid consolidation is taking place in China’s hired car services market, with word that a new alliance is shaping up between major local player Yidao Yongche and an existing tie-up between global giant Uber and local Internet search leader Baidu (Nasdaq: BIDU). As a longtime Chinese Internet watcher, I’m quite surprised at the sudden and rapid speed of consolidation in this particular sector, since such consolidation in other areas tends to be a slow and painful process that often takes years.

A major factor behind this sudden and rapid consolidation could be the participation by all 3 of China’s top Internet players, including Baidu, alongside social networking giant Tencent (HKEx: 700) and e-commerce leader Alibaba (NYSE: BABA). Two of those companies are also involved in a related headline that is seeing Baidu and Tencent making separate bids for the digital mapping division being sold off by former cellphone giant Nokia (Helsinki: NOK1V). Continue reading

IPOs: China Mobile Games Joins Homeward Migration

Bottom line: China Mobile Games could be combined with Shanda Games if buyouts for the 2 companies succeed, followed by a re-listing in China that could gain strong interest from local investors.

China Mobile Games joins de-listing queue

The latest news that China Mobile Games (Nasdaq: CMGE) has received a buyout offer won’t surprise anyone, as it becomes the latest New York-listed Chinese Internet firm to receive such a bid due to its low valuation. What does come as a slight surprise is investor reaction to the bid, which saw China Mobile Games’ share price drop to well below the offer price. The could reflect some skepticism about the quality of this particular bid, which is coming from a Chinese securities brokerage.

This deal marks the latest in a long string of similar buyouts for US-listed Chinese firms whose shares have often languished in New York due to lack of interest from western investors who are unfamiliar with these names. Many of the companies are eying quick re-listings in their home China market, where they believe they can get valuations that are as much as double what they were worth in New York. Continue reading

INTERNET: Regulatory Toughness Needed Towards Alibaba, Telcos

Bottom line: China’s largest corporations need to face stiffer regulatory penalties to ensure their compliance with Beijing rules, as part of a campaign to clean up the country’s business climate.

More strictness needed in Alibaba, telco cases

Some of China’s leading high-tech firms were in the headlines last week for foot-dragging in response to government calls to change their business practices, in separate cases that show why Beijing needs to get more aggressive about enforcing its rules among big domestic corporations.

The first case saw e-commerce giant Alibaba (NYSE: BABA) sued by one of the world’s top makers of luxury goods for allegedly refusing to clean up its popular sites of trafficking in pirated goods. The second saw critics accuse China’s 3 major mobile carriers of taking largely empty steps to improve their mobile data pricing and speeds, after Beijing called on them to take such action. Continue reading