CELLPHONES: LeTV, China’s Next Xiaomi?

Bottom line: LeTV’s new smartphones should generate major buzz when they go on sale this weekend and could easily sell 1 million units in their first 3-4 months, challenging domestic “cool” incumbent Xiaomi.

LeTV takes pre-orders for new smartphones

Smartphone sensation Xiaomi has emerged as one of China’s hottest tech names in the last few years with its cool and trendy image, focusing its sights largely on global leaders Samsung (Seoul: 005930) and especially Apple (Nasdaq: AAPL) as it looks for a place on the global stage. But this globally-minded company could soon have to watch its back as well, with the recent meteoric rise of LeTV (Shenzhen: 300104) as the newest hipster in town.

LeTV went largely unnoticed for the first part of its life, when it was mostly an Internet-based provider of video content similar to YouTube. But it has zipped into the spotlight over the last year, first as it posed a serious challenge to China’s traditional broadcasters and now as it rolls out its own new line of smartphones. Continue reading

NEW ENERGY: Unraveling Accelerates For EU-China Solar Deal

Bottom line: A deal designed to avoid punitive tariffs on Chinese solar panels exported to Europe is rapidly collapsing, with new anti-dumping tariffs likely to be imposed by the end of the year.

New clouds loom in EU-China solar war

A looming clampdown on Chinese solar panels in Europe is rapidly accelerating, with word that the EU will review part of a landmark 2013 agreement that initially helped to prevent a trade war but is showing rapid signs of unraveling. The case centers on the prices of Chinese solar panels, which are typically much lower than their western counterparts due to a wide array of Beijing policies to support the sector.

The US levied punitive tariffs on Chinese panels to address the situation. The EU was set to do the same when several top politicians stepped in and pushed both sides to reach a compromise deal to avoid such action. That deal saw the Chinese manufacturers agree to raise their prices to levels comparable to products from the west. But no sooner did the deal take effect, then the Chinese companies began undermining the agreement by finding ways to secretly refund money to their European customers. Continue reading

FINANCE: Citic, Fosun Shop In US For Sensors, Insurance

Bottom line: Citic Capital and Fosun are expanding their tastes beyond the traditional Chinese preference for distressed assets, reflecting growing sophistication and diverging strategies of China’s emerging private equity buyers.

Citic Capital in group buying OmniVision

Chinese private equity is in a few major headlines this week, picking up assets in the technology, insurance and retail sectors in the US and Japan. The wide range of deals and geographies reflects the diverging strategies of some of China’s emerging private equity giants, which are rapidly developing their own individual personalities on the global stage. Citic Capital is behind 2 of the latest deals, picking up a retail asset in Japan and a US company that specializes in imaging technology. Meantime, Fosun International (HKEx: 656) has made a major new purchase in the US, offering to buy the remaining stake in an insurer that it first invested in last year. Continue reading

News Digest: May 6, 2015

The following press releases and media reports about Chinese companies were carried on May 5. To view a full article or story, click on the link next to the headline.
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  • EU Solar-Panel Industry Wins Review Of China Price Pact (English article)
  • Hua Capital, Citic Capital To Take OmniVision (Nasdaq: OVTI) Private For $1.9 Bln (English article)
  • McDonald’s (NYSE: MCD) May Reach 200 Franchised Stores in China This Year (Chinese article)
  • Mobile Chauffeur App E Daijia Lands $100 Mln Series D Funding (English article)
  • Wanda Chief Wang Jianlin Invests $100 Mln In LeTV (Shenzhen: 300104) Sports (Chinese article)
  • Latest calendar for Q1 earnings reports (Earnings calendar)

CELLPHONES: Gree Joins China Crowd, ZTE Calls On Japan

Bottom line: Gree’s launch of a smartphone line is far too late and could signal the start of a major shake-out for the sector, while ZTE’s move into Japan will be tough but could reap big rewards if it can gain traction.

Gree starts shipping smartphones

You know China’s smartphone market is due for a major correction when a stodgy home appliance maker like Gree (Shenzhen: 000651), better known for its air conditioners, enters the market. But that’s exactly what’s happened, in a move that has the word “dud” written all over it. Meantime, the more established smartphone maker ZTE (HKEx: 763; Shenzhen: 000063) is making a risky but wiser move by targeting the lucrative but often ignored Japanese market, as it looks for growth alternatives outside a Chinese market that is the world’s largest for smartphones but also incredibly competitive. Continue reading

IPOs: Video Firm Baofeng Wins Record Returns With ChiNext IPO

Bottom line: The hugely successful ChiNext IPO for video player maker Baofeng could draw more Chinese tech start-ups to consider listings at home, even though doing so will make their shares subject to huge volatility.

Baofeng sets record with meteoric stock rise

A video player maker called Baofeng (Shenzhen: 300431) is creating a storm on China’s Nasdaq-style ChiNext enterprise board, with a record-breaking meteoric rise for its shares following a late March IPO. The listing marks the end of a long path to market for Baofeng, which originally envisioned an IPO in New York but later abandoned that plan for a listing at home. The company’s hugely successful reception on the ChiNext also charts a potential major new path to market for Chinese tech start-ups, providing an attractive alternative to New York listings that have been the preferred path up until now. Continue reading

MULTINATIONALS: Free Trade Program Gets Boost From Japan, Thailand

Bottom line: A new e-commerce joint venture by Japan’s Itochu and Thailand’s CP Group marks the latest major advance for China’s fledgling free trade zone program, whose policies should eventually expanded to the entire country.

Itochu forms new venture in Shanghai FTZ

China’s fledgling Free Trade Zone (FTZ) program got a new boost last week when a group of corporate giants from Japan, Thailand and China announced a major new retailing joint venture in the original zone in Shanghai. That news came just a week after a major expansion of the Shanghai zone, and the announcement of a plan for 3 additional FTZs in other parts of China.

This sudden expansion of the FTZ program is a welcome development for the many private companies whose growth plans have been stymied for years by China’s huge bureaucracy. That group includes not only big multinationals like Amazon (Nasdaq: AMZN) and HSBC (HKEx: 5; London: HSBA), but also a growing number of homegrown private giants like JD.com (Nasdaq: JD) and Alibaba (NYSE: BABA), which also harbor global aspirations. Continue reading

News Digest: May 5, 2015

The following press releases and media reports about Chinese companies were carried on May 5. To view a full article or story, click on the link next to the headline.
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  • China Said To Probe Medical Device Firms On Bribe Suspicions (English article)
  • Uber’s Guangzhou Office Raided, Drivers’ Website Temporarily Shut (Chinese article)
  • Baidu (Nasdaq: BIDU) To Launch O2O E-commerce Platform Baidu Mall – Source (English article)
  • Video Site Baofeng Tech (Shenzhen: 300431) Rises 16-Fold In First 27 Trading Days (Chinese article)
  • Gree (Shenzhen: 000651) Starts Shipping Smartphones, Eyes 100,000 In First Round (Chinese article)
  • Latest calendar for Q1 earnings reports (Earnings calendar)

INTERNET: Qihoo Gets Global Snub For Misleading Ways

Bottom line: The revocation of global certification for Qihoo’s security software by 3 European bodies will undermine the company’s credibility and hamper its drive to go global, putting pressure on its stock for the next few months.

European bodies revoke Qihoo accreditation

Security software specialist Qihoo 360 (NYSE: QIHU) is finding itself in the middle of a global scandal, with word that several European accreditation bodies have refused to certify its core security software products due to the company’s misleading business practices. The case comes as an embarrassment to Qihoo, which is used to and largely ignores such scandals when they occur in its home market where such practices are relatively common.

But as Qihoo and its peers attempt to go global, they are quickly discovering that many of the things they do at home fall well below the standards set by global bodies, especially in the west. That won’t be too helpful for Chinese tech giants like Qihoo, Baidu (Nasdaq: BIDU), Xiaomi and Alibaba (NYSE: BABA), which are all trying to show the world and investors that they can compete outside their highly protected home market where standards are often a bit lower than in the west. Continue reading

FUND RAISING: WuXi Pharma Joins De-Listing Queue, Renren Waits

Bottom line: WuXi PharmaTech’s privatization will be followed by at least 3-4 more similar buy-outs this year for US-traded Chinese stocks, including a 50-50 chance that Renren will attempt a privatization by mid-year.

Wuxi Pharma gets buy-out bid

I’m beginning to feel like I should start a betting list of Chinese candidates that may de-list from New York, following word that unappreciated drug maker WuXi PharmaTech (NYSE: WX) has become the latest company to announce a management-led buy-out. At the same time, dying social networking (SNS) site Renren (NYSE: RENN) has also announced results of its own recent Dutch auction-style share buyback plan, which also hints that it could become the next company to attempt a privatization. Continue reading

TELECOMS: HP Asset Sale Sparks China Bidding War

Bottom line: Tsinghua Unigroup is likely to win the bidding for a controlling stake in HP’s China-based networking equipment unit, and could help HP consolidate its place as one of China’s leading IT service providers.

Bidding war breaks out for HP asset sale

Hewlett-Packard (NYSE: HPQ) is finding itself in a rare position of power in China, with word that an unusual bidding war has broken out as it looks for a partner to buy a controlling stake in its locally-based networking equipment unit. The development could bring not only a windfall in terms of money HP will get for its H3C Technologies unit, but will also allow it to choose between 2 potent partners to help consolidate its place as one of China’s leading IT services providers.

HP is in the process of splitting itself into 2 as part of a broader restructuring announced last fall. In this case the China-based H3C networking equipment venture would almost certainly go into its new HP Enterprise unit, focused on products and services for corporate customers. The other main unit under the break-up will include HP’s older PC and printer businesses, which will go by the name HP Inc. Continue reading