All posts by newsdoug

E-COMMERCE: Is Amazon Leaving China, or Not?

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Bottom line: Amazon’s withdrawal from selling domestic goods to local buyers in China was inevitable due to its lack of a standout service and cut-throat competition from Alibaba and the money-losing JD.com.

Amazon shutters core China e-commerce selling domestic goods to domestic buyers

The e-commerce headlines have been buzzing these last few days with word that global giant Amazon (Nasdaq: AMZN) is abandoning China, representing the latest setback for a western Internet company in the large market. Amazon has come out with some statements clarifying the matter, in a move somewhat akin to what happened when Internet peer Google (Nasdaq: GOOG) made a similar withdrawal nearly a decade ago.

As Google did then and Amazon is doing now, both companies are being quick to point out that they aren’t completely withdrawing from China, but rather are just exiting what’s arguably their most important business. In Google’s case it shuttered its core China search engine. Now with Amazon, the company says it’s shuttering the part of its business that sells domestically-sourced Chinese products to customers in China. (English article) Read Full Post…

E-COMMERCE – Profit-Seeking JD.com in Overhaul Frenzy

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Bottom line: A steady stream of layoff and cost-cutting reports around JD.com appear to show it’s trying to sharpen its operations to achieve sustained profits starting in the second half of this year. 

Reshuffle going on at JD.com

What’s up with e-commerce giant JD.com (Nasdaq: JD)? That seems to be the question of the moment, amid a recent series of nonstop reports of shakeup at China’s perennial No. 2 in the e-commerce world. The company was stuck under a cloud for much of the second half of last year as its founder, Richard Liu, stood accused of rape in the US. That cloud was finally lifted when the prosecutor looking into the matter decided not to file charges.  (English article)

Since then JD.com has been the subject of a nonstop stream of rumors and confirmed reports involving everything from layoffs to corporate overhauls to an imminent divorce between Liu and his wife. The latest reports seem to continue in that vein, including one saying the company plans to lay off about 8 percent of its workforce and another of some major moves in its top ranks. The latter comes after JD confirmed in February it was laying off 10 percent of its senior executives. (English article) Read Full Post…

MEDIA: Qutoutiao in Fund-Raising Frenzy

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Bottom line: Qutoutiao’s recent flurry of fund-raising, including a major  loan from Alibaba, underscores rising confidence in the news aggregator after its lackluster IPO last year.

Qutoutiao in new fund-raising frenzy

News aggregator Qutoutiao (Nasdaq: QTT) is making up for lost time following its lackluster IPO last fall that raised far less than its original target. The company has just announced a new share sale that will generate about $30 million in cash, just days after raising another $171 million from e-commerce giant Alibaba (NYSE: BABA).

Investors didn’t seem too impressed with the latest cash-raising exercises, with Qutoutiao’s shares shedding some 8 percent in the last trading session. That drop appears related to announcement of the pricing of this latest share sale, since the company first announced the move a few days ago. Regardless of that, this does provide a good opening for us to take a closer look at this company. Read Full Post…

INTERNET: Online Education Looks Good in Principle

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Bottom line: The online education sector is currently in a teething phase that could last for the next two years, but could offer big potential for investors who can separate the wheat from the chaff. 

Big potential in online education?

Today I thought I’d look at some of the major online education stocks to hit the market over the last two years, most turning in a decidedly negative performance that may or may not be justified. The latest of those, Koolearn (HKEx: 1797) stumbled out of the gate late last week with a flat trading debut, and since has posted some minor gains that probably don’t mean too much. (English article)

Koolearn’s anemic performance actually looks quite strong when compared with some of the others that have floated shares over the last two years. Most of those are down moderately to sharply over the last 52 weeks, led by a 67 percent plunge for one called Puxin (NYSE: NEW) and a 55 percent slide for another called Sunlands (NYSE: STG). Read Full Post…

SMARTPHONES: Is Apple’s Price Cutting Enough to Salvage China?

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Bottom line: Apple will continue discounting its iPhones in China to stop its sinking market share, which could slow but not halt its decline in the face of growing competition from the likes of Huawei.

Apple’s retail partners pare back China iPhone prices

Following a break of a month, I’m returning to my writer’s seat with discussion of the China outlook for tech giant Apple (Nasdaq: AAPL), which has turned to a very un-Apple-like strategy of discounting its products in the world’s largest smartphone market. China has been a fickle place for Apple, at one point accounting for nearly a quarter of the company’s global sales, as brand-conscious Chinese paid big premiums for trendy iPhones. That’s hardly the case now, with China accounting for just 15.6 percent of Apple’s total sales in its last quarterly report. Read Full Post…

E-COMMERCE: Alibaba Eyes Germany, UK and Video Streaming

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Bottom line: Alibaba’s interest in Metro’s China operations is part of its new retail strategy, while the purchase of a British payments company by its Ant Financial unit could give it a strong toehold in the European payments market.

Alibaba in new shopping spree

After a period of relative quiet, e-commerce giant Alibaba (NYSE: BABA) is suddenly springing into three relatively major headlines simultaneously on the investment front. Two have a European angle, one involving a major potential investment in German retailer Metro and the other in a British financial services provider by its Ant Financial affiliate. The other is a trans-Pacific deal of sorts, and has the company investing in Bilibili (Nasdaq: BILI), a leading U.S.-listed Chinese video streamer.

In all honesty, this particular flurry of deals seems a bit random and it’s almost certainly coincidence that all are in the headlines at the same time. But that said, each does reflect one or more tendencies by this hyperactive company, which I’ve previously said has far more cash than it knows what to do with.  Read Full Post…

IPOs: With Shutdown in Past, Live Broadcaster Douyu Lines Up to List

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Bottom line: A slowdown in New York IPOs by Chinese firms at the start of the year was largely caused by the government shutdown, and activity could soon pick up starting with a listing by leading live broadcaster Douyu.

Government shutdown hits IPOs

We’ll kick off my first post of the Lunar New Year with a look at New York IPO activity in the first part of 2019, or more precisely the lack of activity for Chinese companies. If this were any other year, I would say such a silence is probably normal, since in the past the first quarter has been a difficult period due to the western New Year holiday on Jan. 1 followed rapidly by the Chinese New Year, which this year fell on Feb. 5.

But this is no ordinary year, coming off a 2018 that was one of the busiest years for Chinese IPOs in New York and Hong Kong in quite some time. This year got off to a relatively quick start with a New York IPO filing to raise up to $300 million by financial technology (fintech) company Futu, which actually came at the very end of last year. (English article) Now the latest reports are saying video streaming site Douyu has just made its own confidential filings for an even bigger offering that could raise up to $500 million. (English article) Read Full Post…

GAMES: Tencent, NetEase Shunned as Game Approvals Resume

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Bottom line: Tencent and NetEase will become long-term beneficiaries of a cleanup of China’s online game sector, despite their lack of new launches so far following the recent end of a 10-month freeze on approval of new titles.

No new approvals for Tencent, NetEase

China’s 10-month freeze on approval of new online games has official ended, but don’t tell that to industry leaders Tencent (HKEx: 700) and NetEase (Nasdaq: NTES). China’s gaming regulator has officially just published its latest list of newly approved game titles, which is its third since it resumed such approvals in late December. (English article)

As with the first two lists, observers are focusing more on who wasn’t represented rather than who was. And as with the first two lists, both Tencent and NetEase were absent once again. That raises the question of what the regulator may be trying to do, and whether this could have long-term ramifications for China’s two leading online game companies. Read Full Post…

SMARTPHONES: Xiaomi Tries to Go Upscale, But Investors Skeptical

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Bottom line: Xiaomi’s stock is probably oversold at current levels due to selling at the end of a lockup period, but will remain an underpeformer for at least the next 1-2 years until it can prove its strategy of moving up-market has legs.

Xiaomi’s stock takes a bath

It’s been a rocky week so far for smartphone wannabe Xiaomi (HKEx: 1810), which is desperately trying to show investors it’s more than just a maker of cheap, low-margin products. The company is getting set to unveil a new strategy to show it plans to wean itself from the low-end phones that are its bread-and-butter, with an upcoming announcement that it will spin off its popular Redmi line of cheaper models. (English article)

But that hasn’t stopped investors from dumping Xiaomi shares en masse over the last two days, in a major no-confidence vote over whether the company can actually execute that strategy. We should be fair here and note that the share dumping that has seen Xiaomi’s stock tank by more than 10 percent is at least partly due to the expiry of a lockup period following its blockbuster IPO last year. Read Full Post…

E-COMMERCE: JD Dodges a Bullet, Gets Support from E-Commerce Has-Been

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Bottom line: A US prosecutor’s decision not to file rape charges against JD.com’s founder may bring short-term relief to the stock, but the case still shows the importance of understanding the unusual role Chinese founders play at their companies.

Scales of justice tip in JD.com’s favor

On this day after Christmas I thought I’d play a little catch-up by weighing in on the controversial decision that saw a Minnesota prosecutor decline to press rape charges against JD.com’s (Nasdaq: JD) founder and CEO Richard Liu. Following the big announcement at the end of last week, there’s been a minor follow-up as another former China e-commerce executive came to Liu’s defense, only to get blasted himself and end up issuing an apology.

There are several big lessons in this tale, led by the fact that Chinese standards for what constitutes acceptable behavior are not always in sync with those in the West. That’s an important lesson for Western investors who may buy into these companies thinking that, for example, a JD.com is the same thing as Amazon.com (Nasdaq: AMZN). The JD case shows that clearly there are major differences in terms of behavior by both the companies and their founders. Read Full Post…

TELECOMS: Huawei Lands at Center of US-China Trade War

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Bottom line: The US case against Huawei’s CFO is likely to end with her release on technical grounds as part of a deal between the US and China, though the company could still face punishment for illegally selling US products to Iran.

Huawei CFO detained for violating US anti-Iran sanctions

It’s a few days old by now, but I wanted to begin the new week by sharing some of my thoughts on the recent blow-up involving telecoms equipment giant Huawei’s CFO, who was detained in Canada at Washington’s request. At this point I mostly want to give my views on the politics behind this story, and also my take on how things are likely to play out.

I’ll start off with the view that this particular story has been a long time in the making, and anyone who thinks it was cooked up by Donald Trump as an excuse to wring concessions out of China is mistaken. I’ll also give my view that this kind of come-uppance for a corporate giant like Huawei is relatively deserved, since Chinese companies have basically thrived and grown as quickly as they have by frequently thumbing their noses at the law. Read Full Post…