TRAVEL: Ctrip, BTG Spotlight China Travel’s Rewards and Risks

Bottom line: New quarterly earnings data show that China’s travel industry is on the cusp of a slowdown likely to last for at least the next 2 years, while a major new fund set up by Ctrip shows the sector still has strong longer-term growth potential.

Ctrip-backed Ocean Link launches $400 mln travel fund

A couple of items from the travel space are casting a spotlight on the risks and rewards of China’s travel sector, which has huge potential but is also susceptible to economic cycles. Highlighting the big potential is word of a new $400 million fund being launched by leading online travel agent Ctrip (Nasdaq: CTRP) and US private equity firm General Atlantic to invest in Chinese travel-related projects. Meantime, the downside was showing up in the newest results of BTG Hotels (Shanghai: 600258), whose first-half profit plunged after its recent buyout of budget hotel specialist Homeinns. Read Full Post…

SMARTPHONES: Poor After-Sales Service Haunts LeEco Smartphones

Bottom line: LeEco’s smartphones will have difficulty finding a major audience over the next 2 years due to technical problems and poor after-sales service, making it hard to meet its aggressive targets.

LeEco smartphones face technical issues, poor after-sales service

An investigative report on the year-old smartphone business of online video superstar LeEco (Shenzhen: 300104) is showing how the company’s dreams of quickly becoming a major player in the crowded space might be more difficult than it realizes. Specifically, the report in the respected Yangtse Evening News is spotlighting major shortcomings in LeEco’s after-sales service, a critical link for its smartphones that are facing inevitable technical problems due to their newness.

I’ve been a LeEco smartphone skeptic for a while now, so perhaps some readers may think I’m biased in spotlighting this particular problem that all new companies face when rolling out a major new product. But the reality is that in all my years of using older cellphones and newer smartphones, never once have I owned a model that didn’t have a major problem at least once that required me to take it to a repair shop. Read Full Post…

China News Digest: August 31, 2016

The following press releases and news reports about China companies were carried on August 31. To view a full article or story, click on the link next to the headline.
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NEW ENERGY: Reports Point to Failure of China’s EV, Green Power Policies

Bottom line: New reports detailing big amounts of idle wind and solar plants, and Beijing’s plans for a new EV incentive scheme, reflect wasteful spending under earlier development plans, the result of China’s rush to quickly develop the new energy sectors.

Huge volumes of China solar, wind plants sit idle

Two new reports are shining a spotlight on the failure of China’s efforts to promote new energy through the construction of wind and solar power plants, and to put more hybrid and electric vehicles (EVs) on the road. Neither report will come as a huge surprise, since the failure of both efforts has been widely reported this year. But they both highlight how cutting-edge industries promoted by Beijing often attract participants more interested in getting generous government subsidies than actually building anything of value.  Read Full Post…

ENTERTAINMENT: Wanda in Yet Another Mega-Park Investment

Bottom line: Wanda’s recent steam of announcements for multibillion dollar deals, including the latest for a $10 billion entertainment complex in Shandong, are mostly hype, and many will never get completed.

Wanda announces new multibillion-dollar project in Shandong

It used to be that I would get quite excited on seeing the word “billion” when used in connection with new investments, since such major sums are relatively rare. But these days the word is becoming almost a cliche in China, and one of the most egregious abusers of the figure is real estate and aspiring entertainment giant Wanda Group. True to that tendency, Wanda and its increasingly chatty chief Wang Jianlin have just announced yet another multibillion-dollar investment, this time for an entertainment complex in the industrial city of Jinan in eastern China’s Shandong province. Read Full Post…

INTERNET: Baidu Gets Proactive with Bitcoin Ban

Bottom line: Baidu’s bitcoin advertising ban represents a more proactive stance that major Chinese firms are starting to take towards controversial business, as they seek to boost their images and avoid scandals.

Baidu bans bitcoin ads

Online search giant Baidu (Nasdaq: BIDU) rippled through the headlines last week with the relatively small news that it would no longer take advertising business from services that hosted trading in bitcoin and other virtual currencies. While seemingly minor on the surface, the move had larger significance due to the controversial nature of virtual currencies and Baidu’s decision to take action without government prodding or the threat of a scandal. Read Full Post…

China News Digest: August 30, 2016

The following press releases and news reports about China companies were carried on August 30. To view a full article or story, click on the link next to the headline.
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  • Microsoft’s (Nasdaq: MSFT) MSN China Portal in Management-Led Buyout (Chinese article)
  • Russo Bros in Talks With Huayi Bros (Shenzhen: 300027) for Partnership (English article)
  • Baoneng (Shenzhen: 000690) Pays 882 Mln Yuan for 26.4 Pct of Dating Site Baihe (Chinese article)
  • Minsheng Bank (HKEx: 1988) Announces Interim Results (HKEx announcement)
  • Private-Equity Firm General Atlantic, Ctrip (Nasdaq: CTRP) in New $400 Mln Fund (English article)
  • Latest calendar for Q2 earnings reports (Earnings calendar)

BANKING: Cross-Strait Tensions Kill Citic Bank Tie-Up

Bottom line: The collapse of a cross-investment between China’s Citic Bank and Taiwan’s CTBC Financial reflects growing cross-strait tensions, and could signal a chill in major new cross-strait investments over the next 4 years.

Citic Bank scraps Taiwan investment

In a troubling sign for companies doing business across the Taiwan Strait, an equity swap between China’s Citic Bank (Shanghai: 601988) and Taiwanese peer CTBC Financial (HKEx: 2891) has collapsed due to regulatory issues. In this case it appears that Taiwan scuttled the deal for reasons I’ll explain shortly, though a Citic spokesman emphasized no politics were involved. But regardless of the stated reasons, this particular development seems to reflect growing tensions between Taiwan and China under a new Taiwanese administration that’s far more wary of Beijing than its predecessor. Read Full Post…

Shanghai Street View: Honing Hospitality

Pudong canal town rolls out welcome mat

I had a sense of deja vu on reading about a plan to develop a scenic river town near our new Disney Resort into a bed and breakfast (B&B) district as a way to raise local living standards while providing some alternate housing options for park visitors. Then I remembered writing a few years ago about a similar plan to transform an aging but colorful area of Hongkou District near my home into a similar B&B hotspot.

These kinds of plans are great in theory, as they raise living standards by helping local residents to upgrade their aging homes into thriving businesses. Such plans also help to restore old architecture and can create unique communities with their own individual personalities, like the bustling Taizifang area. Read Full Post…

China News Digest: August 27-29, 2016

The following press releases and news reports about China companies were carried on August 27-29. To view a full article or story, click on the link next to the headline.
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  • Wanda Agrees to Build $9.5 Bln Culture Project in China (English article)
  • Alibaba (NYSE: BABA) Acquires AGTech (HKEx: 8279) for HK$2.4 Bln (Chinese article)
  • Taiwan CTBC Financial, China Citic Bank (Shanghai: 601988) Cancel Cross-Investments (English article)
  • Agricultural Bank of China (HKEx: 1288) Announces Interim Results (HKEx announcement)
  • Baidu (Nasdaq: BIDU) Freezes Bitcoin Ads Without Warning (English article)
  • Latest calendar for Q2 earnings reports (Earnings calendar)

IPOs: Investors Cool on Postal Bank, Lufax Delays Listing

Bottom line: Weakening sentiment towards Postal Bank’s IPO reflects concerns about China’s economic slowdown, while Lufax’s choice of Hong Kong for its IPO should help to attract more international investors.

Lufax IPO bound for HK

What’s likely to be this year’s biggest IPO by Postal Savings Bank of China is limping ahead, with word the ultra-conservative lender is set to sign up $6 billion in commitments for its Hong Kong offering. But western investors are reportedly staying away from the deal, worried over high valuations and China’s sputtering economy.

Meantime, another financial IPO by leading P2P  lender Lufax is back in the headlines, with word the listing probably won’t happen until next year and will occur in Hong Kong. That news marks a flip-flop from reports earlier this week, when media cited Lufax’s largest backer saying plans were still on track for an IPO this year, with Shanghai as the preferred listing location. Read Full Post…