INTERNET: Alibaba Bank Nears, As Piracy Scandal Grows

Bottom line: The piracy scandal rocking Alibaba will blow over in a few weeks with minimal longer-term impact, though the company’s stock will enter a downturn over the next 6 months due to overvaluation.

Piracy scandal grows around Alibaba

This week could well go down as a turning point for high-flying e-commerce giant Alibaba (NYSE: BABA), whose growing war of words with a top government agency is quickly becoming a major scandal. The increasingly heated exchange has almost completely overshadowed the latest media reports that say Alibaba’s financial arm is preparing to launch a bank later this year. A separate company announcement indicates the bank will use an innovative credit rating system that draws on Alibaba’s huge volume of big data generated from the billions of transactions and other information exchanges that cross over its network. Continue reading

FUND RAISING: Car Inc Raises $500 Mln, Thrives On Rentals

Bottom line: Strong pricing for a large new bond from Car Inc reflects good potential for companies in China’s secondary car market, which should see strong growth as new car sales slow.

Car Inc raises $500 mln in bond offer

Let’s take a brief break from Internet companies to look at recently listed auto rental specialist Car Inc (HKEx: 699), which has excited the market with a new $500 million bond offering. Despite its earlier setbacks, including an aborted previous IPO, Car Inc has done quite well since its listing last September, as Chinese car-related plays find a strong audience among international investors. Interest seems especially strong toward car companies that target the second-hand market, as new car sales look set to slow sharply due to China’s slowing economy and restrictions being imposed by many cities to control pollution. Continue reading

INTERNET: WeChat Draws Advertisers, Food Delivery, Youth

Bottom line: Tencent’s strong early showing for a new WeChat-based advertising service and its investment in a take-out dining service reflect building momentum in its drive to build WeChat into a major new profit center.

BMW, Coke launch ad campaigns on WeChat

A couple of media reports are shining a spotlight on Tencent’s (HKEx: 700) WeChat, and some of the new steps it is taking to monetize the hugely popular service that is rapidly expanding beyond its roots as a mobile messaging service. At the same time, another report from Tencent itself is providing some insight into who exactly uses WeChat. It should come as no surprise that the report shows WeChat’s biggest fans are young and mostly male users, which are some of the most attractive targets for the online merchants and advertisers that Tencent wants to do more business on the platform. Continue reading

News Digest: January 29, 2015

The following press releases and media reports about Chinese companies were carried on January 29. To view a full article or story, click on the link next to the headline.
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  • China Regulator Blasts Alibaba (NYSE: BABA) For Illegal Business On Its Websites (English article)
  • Qualcomm Doesn’t Pay Fine, Defends Self In China Anti-Trust Probe (Chinese article)
  • LeTV (Shenzhen: 300104) Enters Smartphone Arena (Chinese article)
  • Lions Gate (NYSE: LGF) Plans Film Production Deal With China’s Hunan TV (English article)
  • Rental Car Firm Car Inc (HKEx: 699) To Raise $500 Mln Through Bond Issue (HKEx announcement)

CELLPHONES: Apple Steals China Smartphone Crown

Bottom line: Apple’s surge in fourth-quarter China sales owes to its iPhone 6 release and growing relationship with China Mobile, though it could have trouble retaining its new crown as the nation’s top smartphone brand.

iPhone sales zoom in China

Skeptics who thought Apple (Nasdaq: AAPL) might be losing its luster in China might have to rethink that theory, following release of a new report that says the gadget giant grabbed the title of China’s biggest smartphone seller for the first time ever in the fourth quarter. That surprising result came as Apple released new quarterly earnings that showed China sales also surged 70 percent in its latest quarter, more than double the pace of its global revenue growth.

The surprising China surge comes as Apple works closely to address Beijing’s concerns about national security risks and the privacy of Chinese iPhone users, issues that reflect one of the continuing challenges it will face in the market. Continue reading

INTERNET: Alibaba Responds To Audit, Gets New Owners

Bottom line: Alibaba’s stock is likely to come under continued pressure over the next 6 months, as it grapples with overvaluation, piracy issues and a large volume of shares coming back into the market from Yahoo.

Yahoo to spin off Alibaba stake

E-commerce giant Alibaba (NYSE: BABA) is in a couple of major headlines today, raising questions about its future ownership and also its open platform business model. On the ownership side, US Internet giant Yahoo (Nasdaq: YHOO) has announced it will spin off its large stake in Alibaba into a separate company, and then distribute shares in that new firm to existing Yahoo shareholders. On the business model side, Alibaba has enlisted one of the thousands of merchants on its popular Taobao C2C marketplace to respond to a government audit that found nearly two-thirds of goods sold on Taobao were fakes. Continue reading

WEIBO TALK: Huawei Shows Frustration, Xiaomi Elation

Huawei frustrated at lack of attention

Two of China’s most successful tech companies, Xiaomi and Huawei, took center stage in the microblogging realm over the past week, engaging in a rare direct war of words over their competing products in the nation’s overheated smartphone market. Their online sparring aside, the pair of tech stars also engaged in their own separate globally-focused activities that emphasized attempts by each to become the nation’s first truly international smartphone brand.

Huawei’s media-shy founder Ren Zhengfei traveled to the World Economic Forum in Davos, Switzerland, where he gave a rare public speech in which he appealed to the US to accept his company’s products, in remarks chronicled by some of his top deputies on their microblogs. Meantime, several recently recruited member of Xiaomi’s high-profile international team met at the company’s headquarters in Beijing, where they were talking strategy as the company continues its global expansion. Continue reading

News Digest: January 28, 2015

The following press releases and media reports about Chinese companies were carried on January 28. To view a full article or story, click on the link next to the headline.
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  • Yahoo to Spin Off Alibaba (NYSE: BABA) Stake Tax-Free As Public Company (English article)
  • Taobao Publishes Merchant Letter Questioning Accuracy Of Govt Piracy Audit (Chinese article)
  • JD.com (Nasdaq: JD) Launches Major Imported Foods Initiative (GlobeNewswire)
  • Apple (Nasdaq: AAPL) Ranked As Top China Smartphone Seller In Q4 – Report (Chinese article)
  • Huawei Eyes $16 Bln In 2015 Smartphone Sales With High-End, Export Push (Chinese article)

CELLPHONES: Lenovo Bets Big On Motorola China Homecoming

Bottom line: Motorola’s China homecoming looks well-designed conceptually, but will have trouble due to stiff competition and is unlikely to become a major player in the next 2-3 years.

Moto returns to China

I’ve written quite a bit already about Lenovo’s (HKEx: 992) big plans for its recently acquired Motorola brand, which has just made its formal return to China with the local launch of the Moto X smartphone. But what’s surprised me a bit is the magnitude of the campaign that Lenovo has given to this homecoming, which hints at the big hopes it has for the brand whose name whose cutting-edge phones were once the ultimate in “cool” and “trendy”.

It’s been a number of years now since that image was relevant, and many younger Chinese might not even remember the Motorola name at all. But Lenovo is clearly hoping that this homecoming and all the accompanying fanfare will reawaken some of those former impressions among China’s older consumers, in a certain form of “retro-cool” to counter the more recent rise of names like Xiaomi and Coolpad (HKEx: 2369). Continue reading

INTERNET: Audit Spotights Counterfeit Risk For E-Commerce

Bottom line: A new audit reveals how widespread counterfeit goods are on Chinese e-commerce sites, which will remain a major risk for site operators and their shareholders.

Taobao slammed in piracy audit

A new audit from State Administration For Industry and Commerce (SAIC) is showing just how pervasive fake goods are on the Chinese Internet, underscoring the huge risk that consumers face when purchasing online. The results underscore the huge risk to e-commerce firms as well, since many of China’s top names including Alibaba (NYSE: BABA) and JD.com (Nasdaq: JD) operate so-called “open platforms” that are simply online marketplaces where third-party merchants can sell their goods. Such merchants are notoriously hard to police, and these latest results show that they frequently offer fake and substandard products to buyers. Continue reading

BANKING: BBVA’s Citic Sell-Down Shows Foreign Bank Frustration

Bottom line: China needs to accelerate the opening of its banking sector to foreign participation, or risk losing overseas expertise and investment dollars that could revitalize the sector.

BBVA sells down Citic Bank stake

Spain’s Banco Bilbao Vizcaya Argentaria (BBVA) became the latest major foreign bank to check out of China last week, when it sold off half of its stake in Citic Bank, a unit of one of the nation’s leading financial services groups. The move follows a similar series of sales by other major foreign financial firms over the last 5 years, depriving China’s state-run banks of valuable expertise they could have used as they make the transition from their past as policy lenders to more commercially-oriented institutions. Continue reading