All posts by newsdoug

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…

SMARTPHONES: Huawei Takes New Look at India

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Bottom line: Huawei’s new push into India looks like a smart and well-timed move to take advantage of the country’s emerging middle class, and could help it take the global smartphone crown by the end of next year.

Huawei takes aim at India

As it creeps up on its goal of becoming the world’s largest smartphone maker, the controversial Huawei appears to finally be waking up to the potential of the fast-growing India market. That’s the key takeaway from some Indian media reports last week, which quoted a company executive saying Huawei is planning a major push into an India market that it has largely ignored up until now.

The bigger theme in this particular story is that India is quickly emerging as a market not to be taken lightly on the smartphone scene. Global leader Samsung (Seoul: 005930) learned that early on, and until recently was the market leader before getting eclipsed by China’s Xiaomi (HKEx: 1810). I was quite surprised when doing some quick research for this post to learn that India actually passed the US to become the world’s second largest smartphone market in the third quarter, behind only China. Read Full Post…

INTERNET: Amnesty, Employees Launch Google Attack

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Bottom line: A major new campaign calling on Google to abandon its plan to return to China’s search market will add pressure on the company to reconsider its decision, but is unlikely to succeed unless the pressure grows significantly stronger.

Amnesty launches petition to protest Google’s China return

If Google (Nasdaq: GOOG) CEO Sundar Pichai thought he could quietly launch a new filtered China search engine without any major backlash, he’s quickly finding out otherwise. The search giant’s controversial plan to return to the world’s biggest search market is facing its stiffest resistance to date, in a frontal assault coordinated by human rights group Amnesty International and Google’s own employees.

The message from both groups is the same: Don’t do it. In Amnesty’s case, the group has launched an online petition (announcement) calling on Google not to go through with the plan, code named Dragonfly, that was first uncovered back in August. (previous post) At the same time, a group of more than 300 Google employees has signed a petition urging the company to reconsider its China plans on the blogging site Medium. (online petition) Read Full Post…

E-COMMERCE: China E-Commerce Answers Beijing’s Import Call

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Bottom line: China’s drive to boost imports will benefit the nation’s big e-commerce companies with cross-border trade capabilities, though such purchasing will still be a small fraction of their overall volume.

China steps on import accelerator

It may be election day in the US, but here in China the focus is decidedly on imports with the staging this week of a massive import-focused expo in Shanghai. This particular event, officially called the China International Import Expo, has big political overtones, which I’ve looked at in a bit more depth in my weekly column on doing business in China, for anyone who is interested. (English article)

I’ll recap that element briefly in a moment, but the focus of this post will fall squarely on some relatively big numbers coming out of three of China’s leading e-commerce companies, in terms of the kinds of imports they think they can facilitate over the next few years. One report has added up commitments from Alibaba (NYSE: BABA), JD.com (Nasdaq: JD), Suning (Shenzhen: 002024) and NetEase (Nasdaq: NTES), and determined the four have collectively said they could facilitate 1.5 trillion yuan in imports, equal to about $216 billion. (Chinese article) Read Full Post…

CHIPS: China Chipmaker Lands in Eye of Trump Trade War

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Bottom line: Washington’s punishment of a Chinese chipmaker accused of stealing from Micron Technology is part of a savvy targeted approach by the Trump administration aimed at spotlighting illegal business practices by Chinese tech firms.

Trump punishes China chipmaker for IP theft

I thought I’d begin this Monday with a wrap and look at what’s ahead for a Chinese chipmaker called Jinhua, which fell squarely in the crosshairs of Donald Trump’s trade war with Beijing in a series of breakneck developments last week. This particular case seems to be part of a growing pattern that is seeing Trump pick his battles one at a time, at least when it comes to handling Chinese technology companies.

We’ll review the details on this latest case involving Jinhua and its dispute with US chip giant Micron Technology (Nasdaq: MU) shortly. But the bigger picture is that Trump has accused Chinese companies of stealing US intellectual property and has made that issue central in his current push for a trade deal. Previously US companies with such complaints could only seek assistance from the courts, mostly in the US and EU, since few believe the Chinese court system could handle such cases effectively and objectively. But the government can obviously take action much more quickly and effectively, as Trump is showing with his latest actions. Read Full Post…

E-COMMERCE: Alibaba Lays Out Big Goals in Annual Letters

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Bottom line: Alibaba’s vague road map in its latest chairman and CEO annual shareholder letter is too far off to be meaningful, but does chart its aspirations to change from its current form to something more like an IT services company.

Alibaba shares future vision in shareholder letter

Alibaba (NYSE: BABA) founder Jack Ma and his heir apparent Daniel Zhang have just laid out their vision for the e-commerce giant in their latest annual letter to shareholders, and I have to say it’s at once very grand while also being quite short on detail. There are some lofty goals revealed inside, headlined by a new plan with some targets for what the company hopes to achieve by 2036. Never mind that that’s nearly 20 years away, which is like an eternity when it comes to the Internet.

At the same time, there’s a very general road map for how we get there, all of which I’ll detail shortly. Alibaba has actually executed relatively well so far on some of its road map, which roughly has it transforming from a mere e-commerce company to something more like an IT services provider. But nearly all of that diversification has been within its highly protected domestic market so far, and it’s far from clear it can replicate that model into its nascent international operations. Read Full Post…