Journalist China

Business news from China By Doug Young.
Doug Young, journalist, has lived and worked in China for 20 years, much of that as a journalist, writing about publicly listed Chinese companies.

He is based in Shanghai where, in addition to his role as editor of Young’s China Business Blog, he teaches financial journalism at Fudan University, one of China’s top journalism programs.
He contributes regularly to a wide range of publications in both China and the west, including Forbes, CNN, Seeking Alpha and Reuters, as well as Asia-based publications including the South China Morning Post, Global Times, Shanghai Daily and Shanghai Observer

Patent Filing: Beijing’s Latest Directive 专利申请：政府最新指导

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It seems Beijing has decided China’s companies need to innovate more and has instructed them to do so, resulting in a flood of new patents for Chinese companies and other entities that I suspect are worth little more than the paper they’re printed on. That’s my major conclusion for why the nation’s regional governments and companies are suddenly flooding the media with reports showing off how many new patents they’ve received, as all vie to comply with Beijing’s silly innovation directive. According to new statistics from the World Intellectual Property Organization, patent applications rose 10 percent globally last year, but China’s rise was 3 times that much at 33 percent. (English article) Chinese telecoms giant ZTE (HKEx: 763; Shenzhen: 000063) pushed aside Japan’s Panasonic (Tokyo: 6752) to take the crown for the individual company with the most patent applications, filing for a hefty 2,826 patents versus 2,463 for Panasonic. ZTE’s crosstown rival Huawei also was busy at the patent office, filing 1,831 applications to finish third among individual companies. ZTE even put out a press release to publicize its accomplishment, adding that more than 60 percent of its filings were related to 3G, 4G, the Internet of things and cloud computing, all areas of the future. (company announcement) Meantime, one Chinese media report saw authorities from Jiangsu province  congratulating themselves for seeing nearly 200,000 patents granted in their territory last year, with more than 348,000 applications filed — the biggest total for any individual province. (English article) I don’t want to be too cynical here, but am I the only one who sees all these numbers and self congratulation as a bit too loud and aimed at capturing the attention of Beijing central planners who have ordered this ongoing campaign to innovate more? I think it would be far more interesting to see how useful any of these patents are, rather than just looking at the number of actual patents, although obviously patent usefulness is far more difficult to quantify than simple figures. I do find it a bit ironic that ZTE, despite saying how hard it is working to develop new technologies like 3G, 4G and cloud computing, seems to be focusing the majority of its effort these days on becoming a top global name in low cost smartphones. Maybe they should be talking about how many patents they’ve received on that front, which could be far more important to their future than more abstract things like cloud computing and the Internet of things, which are most likely still a long way from becoming profitable business lines.

Bottom line: Beijing’s directive for more innovation is causing Chinese companies and government officials to pay too much attention to patents instead of real innovation.

Related postings 相关文章:

◙ Unicom Trials 4G, ZTE Dusts Off Old Numbers 中国联通试验4G技术 中兴通讯旧账重提

◙ Huawei, ZTE In Latest PR Offensive With US Spending Spree 华为、中兴签订美国大单恐醉翁之意不在酒

◙ Huawei and ZTE: Swapping Networking for Cellphones? 华为和中兴：转型进军手机市场？

New Solar Storm Brews in Europe 欧盟或发起反倾销调查 中国光伏业再蒙阴影

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It seems the storm dumping rain on Chinese solar cell makers for most of the last year won’t end anytime soon, with Chinese media now citing gloomy industry watchers saying Europe is likely to soon launch an own anti-dumping investigation into the industry following a similar one in the US. (English article) I don’t want to rush to judgment here, but perhaps it’s time that Beijing and China’s solar firms themselves admit that perhaps they are unfairly subsidized by the Chinese government, and try to work with European and US government officials to find a new plan that would address everyone’s concerns. Of course that doesn’t seem likely to happen anytime soon, with China continuing to deny that it unfairly subsidizes its industry, which now produces more than half of the world’s solar cells, with things like export rebates, low-interest loans and other incentives like free or cheap land. According to a report on the front page of today’s China Daily business section, a Commerce Ministry official says the European Union has already accepted complaints from its own solar cell makers over anti-dumping allegations against their Chinese rivals, and is likely to soon launch an official investigation, which means punitive tariffs may be coming soon if the investigation results in a ruling against China. Such a ruling would be even more devastating to Chinese solar cell makers than a similar ruling likely to come soon from the US, as Europe now account for a hefty 80 percent of all of China’s solar-related exports, with shipments of solar panels to the market worth more than $30 billion in 2010. Battered shares of Chinese solar firms, struggling to recover from their industry’s worst-ever downturn for most of the last year, tumbled even more on Tuesday trade in New York as word of the possible EU investigation spread. Industry leader Suntech (NYSE: STP) dropped 6 percent to $2.85, once again approaching its all-time low after a February rally on hopes that the industry’s downturn had bottomed out and prices were starting to stabilize. Other solar firms saw similar results on Wall Street, with Yingli (NYSE: YGE), Trina (NYSE: TSL) and Canadian Solar (Nasdaq: CSIQ) all down between 3 and 4 percent. Recent signals coming from the sector in its latest quarterly results indicate that many executives are cautiously optimistic that a rebound is on the way, partly driven by an anticipated big jump in building of new solar power plants in their home China market as well as many other developing markets. Such a mini-boom may indeed be coming, but it will hardly be sufficient to offset the huge losses that all of these companies would suffer if they lose access to the US and EU markets that now account for most of their sales. If that happens, which looks very likely, don’t expect to see any of these companies return to profitability anytime soon.

Bottom line: An anti-dumping investigation against Chinese solar panel makers in Europe looks likely, dealing an even bigger blow to the sector than a similar ongoing US investigation.

Related postings 相关文章:

◙ Yingli Results: Rescue En Route From China? 英利财报：来自中国政府的营救？

◙ Suntech Cleans House As Rebound Nears 光伏行业或年中回

◙ Solar: New Tie-Ups as US Ruling Looms 光伏产品倾销裁决临近 中国企业忙于外联公关

Slowing Ad Revenue Weighs on Phoenix 凤凰新媒体看淡广告收入前景

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The latest sign of an advertising slowdown on the Internet is coming from the high-flying Phoenix New Media (NYSE: FENG), whose investors did some profit-taking in Tuesday trade before the company announced impressive fourth-quarter results that saw its ad revenue double even as it predicted the rate of increase would slow quite a bit in the first quarter. (company announcement) Shares of Phoenix tumbled nearly 6 percent in Tuesday trade, though they bounced back slightly after-hours after the results came out. The company, the new media arm of Phoenix Satellite Television (HKEx: 2008), said its fourth-quarter advertising revenue jumped by just over 100 percent to $24 million, helping to drive a 200 percent increase in its net profit. But clearly the more worrisome element was Phoenix’s outlook for the current quarter, in which it forecast that ad revenue growth will slow to about 70 percent — meaning the rate of increase will slow by about a third. As a result, the company expects its growth rate for total revenues to fall by even more, about 50 percent, to about 35 percent in the current quarter. In fact, I’ve been predicting this slowdown for a while as China’s Internet companies, once flush with investor cash, start to burn through their money piles and either go out of business or cut back sharply on their ad spending. Earlier this week, popular online men’s fashion retailer Masa Maso said it was planning to slash its 2012 advertising budget by 50 percent, as it focused more on getting repeat business from existing customers rather than the costlier proposition of finding new ones through aggressive advertising. (previous post) The slowdown is likely to hit most companies that rely heavily on advertising for their revenue, from search leader Baidu (Nasdaq: BIDU) down the food chain to leading portal Sina (Nasdaq: SINA) and online video and social networking sites like Youku (NYSE: YOKU) and Renren (NYSE: RENN). Baidu previously forecast that growth for its revenue — nearly all of which comes from advertising services — would slow in the current quarter to 75 percent from 82 percent in last year’s fourth quarter. Premier names like Baidu are likely to see the smallest effect from the slowdown, although even Baidu could see its revenue growth rate slip below 50 percent by year end. Meantime, look for much bigger slowdowns at less attractive ad platforms like Youku and Renren, with names like Sina and Phoenix likely to be somewhere in the middle when the nascent downturn starts to accelerate.

Bottom line: Outlook from Phoenix New Media is the latest indicator of a looming ad slowdown, which will sharply curb growth at firms dependent on ad revenue.

Related postings 相关文章:

◙ Fashion E-tailer Cuts Point to Ad Slowdown 玛萨玛索削减广告投入

◙ Baidu’s Strong Growth Underwhelms 百度业绩持续强劲增长将投资者期望抬升过高

◙ Sohu Fails to Inspire With Latest Results 搜狐最新财报缺乏利好激励

Jin Jiang Looks for Room at the Global Lodge 锦江集团寻求跻身国际高端酒店之列

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I’ve been watching with interest these last few weeks as Jin Jiang (HKEx: 2006), one of China’s oldest and best known non-budget hotel brands, has been partnering with a US firm in a bid to compete with big international operators, making it a potentially interesting investment bet over the longer term if it can succeed. Of course, such success is far from assured, as Jin Jiang, despite its long history in China, still has much to learn to compete with the likes of Marriott (NYSE: MAR) and Hilton, both of which have far more experience and, equally important, reputations for operating top-notch hotels. But a couple of recent franchising deals look interesting enough to merit a mention here as a potential sign of big new developments for Jin Jiang. In the latest of those announcements, Interstate China, a joint venture hotel management company between Jin Jiang and US firm Thayer Lodging, has announced it will take over operation of the JC Mandarin hotel in Shanghai, one of the city’s oldest 5-star hotels whose image has faded somewhat in recent years as many of the bigger brands have opened newer and better-run properties. (English announcement) Announcement of the deal comes just weeks after Interstate also announced it will also manage a Shanghai-based DoubleTree, one of Hilton’s brands. The venture will also manage the J Hotel when it opens in Shannghai Tower, which will become China’s newest skyscraper with its scheduled opening in 2014. With the latest additions, the joint venture now manages eight hotels in China, and clearly it has much bigger plans for the market. I’ve visited a number of Jin Jiang hotels during my years in China and, while it’s clearly one of the better managed domestic brands, it still lags well behind the big international names in terms of quality and overall guest experience. That said, I like the joint venture and franchising approach that Jin Jiang is taking to try and build itself into a world-class player. The pairing with Thayer has obvious advantages of bringing in an experienced global player, while the franchising approach will allow Jin Jiang to avoid many of the costs associated with building a new brand. I suspect Jin Jiang’s ultimate goal is to create its own new brand after it has sufficient experience, which it could then develop not only in China but also export to other countries. Of course, the big question is whether Interstate China will be able to earn a reputation as an operator of top-end hotels, which it will soon have a chance to prove if it can improve the JC Mandarin and operate well-received hotels in its other properties. Given the problems that often occur with such Sino-foreign joint ventures, I would give this one just a 50-50 chance of success. But if it does succeed, Jin Jiang  could indeed become an interesting investment alternative for those who like the mid- to high-end China hotel story.

Bottom line: Jin Jiang’s aggressive new push into higher-end hotels through a US joint venture has a 50-50 chance of success, potentially helping it to compete with the big international brands.

Related postings 相关文章:

◙ New Year Brings New Starts for China Lodging, Grace-Hua Hong Merger 汉庭换将,华虹NEC和宏力半导体合并

◙ China Lodging: Rebound Ahead 中国经济型酒店业绩回升在望

◙ Hotels: Expo Hangover Set to Linger into 2012

Lenovo Completes Leadership Change, Yang Uninspired 联想完成高层调整，杨元庆难鼓舞人心

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Ambitious PC maker Lenovo (HKEx: 992), arguably China’s best known global brand, is sending out signals that it has completed a transition that will see founder and longtime leader Liu Chuanzhi formally bow out of the company, though the first comments from new head Yang Yuanqing are hardly inspiring. Liu was notably absent at the opening of the National People’s Congress that started this week in Beijing, with media citing an unnamed illness for his failure to attend an annual event he has gone to for years alongside the nation’s top politicians and business leaders. (Chinese article) At first I thought this might be cause for concern, as Liu was the main force that built Lenovo from a small PC seller in Beijing to the world’s second biggest brand through a series of acquisitions and strong focus on developing markets. But now we’re seeing that Yang, his hand-picked successor, is speaking for the company on the sidelines of the NPC in Beijing. That, coupled with the Hong Kong stock exchange’s disclosure yesterday that Yang has recently exercised a large number of options to buy Lenovo shares, seem to be the company’s way of saying that Yang is officially taking over at the helm of Lenovo and Liu will no longer take part in major decisions, following his formal retirement last year. (previous post) So, what exactly did Yang say at his first NPC since taking over at the helm? Instead of making grand visionary statements about where he sees the company going or what products and markets will power it into the future, he chose to talk about the more mundane subject of the burdens of China’s high value added tax and how that is making its products more expensive. (Chinese article) Clearly this issue is an important one for Lenovo, which still counts on China for half of its sales, and it’s also  quite possible Yang also made some visionary remarks that reporters simply chose to ignore. But from my perspective, these kinds of remarks don’t offer the most reassuring sign for investors, reflecting more the kinds of things a bureaucrat and manager would focus on rather than the bigger issues we should expect from the chairman of such a major company. Obviously you can’t draw too many conclusions from just one set of remarks like this. But history watchers will recall that Yang was formerly given the chairman’s job after Lenovo’s landmark purchase of IBM’s (NYSE: IBM) PC assets in 2005, only to have to step aside and let Liu return after the company ran into numerous problems several years later. The same could soon happen if Yang continues to perform like a bureaucrat and mid-level manager, boding poorly for the company’s longer-term future. And this time, Liu won’t be there to fix things if the company runs into problems.

Bottom line: Remarks by Lenovo’s new chairman at his first National People’s Congress reflect a lack of broader vision, boding poorly for the company’s longer term future.

Related postings 相关文章:

◙ Liu Steps Down at Lenovo — Again 柳传志再度卸任联想董事会主席

◙ Acer Trips, Lenovo Next? 联想应避免重蹈宏基覆辙

◙ Lenovo Results: Honeymoon Nearing an End? 联想并购後的蜜月期何时结束？

Alibaba Tests Waters for Group Listing 阿里巴巴试水集团整体上市

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Even as it continues the slow and tortured process of a massive buyback of shares from its biggest stakeholder, leading Chinese e-commerce firm Alibaba continues to test the waters for a potential mega-listing of itself, this time by releasing data on group-wide profits that highlight its fast-growth story. Chinese media are quoting a document recently filed with the US securities regulator saying Alibaba Group, 40 percent owned by struggling global search firm Yahoo (Nasdaq: YHOO), posted a profit of $339 million in the 12 months through October 2011, marking an impressive seven-fold increase from the previous 12-month period (Chinese article) The data show that the huge profit jump was clearly the result of Alibaba’s achieving economies of scale, since revenue grew by a much slower but still impressive 80 percent to $2.3 billion. Clearly the big jump in profits didn’t come from its Alibaba.com (HKEx: 1688) B2B marketplace, one of the group’s oldest assets and its only publicly traded one which has seen growth slow sharply in the last year as its business matures and it deals with a fraud scandal. Alibaba is in the process of privatizing Alibaba.com in its effort to downplay that slower growing part of its business and draw more attention to its higher growth units like its Tianmao online mall, formerly known as Taobao Mall, and its AliPay e-payments unit, both of which were probably major contributors to the big jump in profits. Of course people who follow this story will know that Alibaba is trying to buy out the 40 percent stake in the company held by Yahoo, in talks that have dragged on for months now. I’m quite certain that Alibaba is trying to buy back the stake for a price that will give it the highest valuation possible, as it probably plans to turn around and re-sell some or all of that stake at a premium to other investors. The latest disclosure of the group’s fast profit growth, combined with comments from an executive a few weeks ago (previous post), make it look increasingly like Alibaba is seriously considering a listing for the entire group company once it cuts its ties with Yahoo. I’ve previously said such an offering looks like a smart move, as Alibaba is a relatively rare case where its parts are probably worth more together as a package than as individual pieces, as they are all focused on the core e-commerce business and have many synergies. The company is reportedly trying to strike a Yahoo deal that would value it at $32 billion or more, and with these kinds of financials and general market hype created by founder Jack Ma it’s looking like he might actually get that valuation or even higher. He and his team have always hinted they think they should be valued in the same neighborhood as Baidu (Nasdaq: BIDU) and Tencent (HKEx: 700), China’s 2 most valuable Internet companies, now both worth about $48 billion. A group listing would certainly come close to helping him reach that target.

Bottom line: The release of group-level data on Alibaba’s rapid growth is the latest indication the company is weighing a potential listing of the entire group either this year or next.

Related postings 相关文章:

◙ Alibaba.com Privatization: Parent IPO Coming? 阿里巴巴网私有化：母公司或将上市？

◙ Alibaba Looks for Value With Delisting Plan 阿里巴巴计划退市以寻求价值

◙ Alibaba: Let’s Get This Show Finished 阿里巴巴和雅虎赶紧“离婚”吧

Fashion E-tailer Cuts Point to Ad Slowdown 玛萨玛索削减广告投入

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There’s an interesting report in the domestic media saying popular online men’s fashion retailer Masa Maso is planning to slash its advertising budget by half this year, a move that will probably be repeated throughout the industry as many e-commerce firms, most of them losing money, go into cash conservation mode in their struggle to survive. Of course that also bodes poorly for companies that depend heavily on such ad spending for their revenue, from search leader Baidu (Nasdaq: BIDU), which gets nearly all its revenue from advertisers, to web portals like Sina (Nasdaq: SINA) and Sohu (Nasdaq: SOHU) and video and social networking sites likes Youku (NYSE: Youku) and Renren (NYSE: RENN). Let’s look at the report itself, as it does contain some details that show how the situation could play out. It cites a Masa Maso executive saying the company began slashing its ad spending in the second half of last year as part of a strategy to focus more on customer retention, in what looks like a roundabout way of saying it finally realized it had to cut costs and become profitable or risk going bankrupt. (English article) Most significantly, the executive says Masa Maso will focus its limited spending on search advertising, reflecting a broader trend that will see e-commerce firms and other advertisers probably cut back on ad platforms with more marginal returns in favor of ones with better track records. That should play to the advantage of search, which obviously means that Baidu could suffer less than others when the looming spending downturn becomes a major tide. Meantime, I would expect portal operators like Sina to also do relatively well in the coming downturn, as they tend to attract more mainstream audiences that would appeal more to advertisers. Companies most likely to take the biggest hit are specialty players, especially ones that cater to younger demographics who have less money to spend and thus are  less attractive to advertisers. That category includes many money-losing companies such as video sharing sites like Youku and social networking ones like Renren, which means that these companies might have to wait longer still to achieve their quest for sustainable profits. I expect this report from Masa Maso reflects a sharp slashing of ad budgets for 2012 in general, meaning we should start to see some of the damage show up when companies that depend on ads for their revenue start reporting their first-quarter results in April and May. When that happens, look for investor dollars to flow to the big names like Baidu and Sina, while shares of less popular advertising platforms like Youku and Renren could take a hit.

Bottom line: A slash in advertising by a major fashion retailer reflects broader cuts by e-commerce firms this year, which will soon show up in ad-dependent firms’ bottom lines.

Related postings 相关文章:

◙ Baidu’s Strong Growth Underwhelms 百度业绩持续强劲增长将投资者期望抬升过高

◙ Sohu Fails to Inspire With Latest Results 搜狐最新财报缺乏利好激励

◙ Sina Results: Not So Diversified After All 新浪仍依赖广告,突围遇阻

China Telecom iPhone Debut Looks Strong 中国电信iPhone初次发售，势头强劲

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China Telecom’s (HKEx: 728; NYSE: CHA) newly launched iPhone 4S has been hogging the headlines these last few days, with everyone scrambling to figure out if the debut of the popular smartphones by China’s third largest telco will be a success. The slew of media reports accompanying China Telecom’s iPhone launch on Friday, when it began taking orders for the 4S, seem to point to a modestly successful beginning. The company has offered a number of plans, each of which is priced about 100 yuan less than comparable ones offered by rival China Unicom (HKEx: 762; NYSE: CHU), the only other Chinese carrier with an Apple (Nasdaq: AAPL) tie-up which began selling the 4S in January. (English article) As to actual demand, media are looking at a number of angles, including online sales, store orders and comments from China Telecom itself to judge demand, as the iPhones themselves won’t become available until this Friday. The company itself is saying first-day sales exceeded its own expectations, though it isn’t giving any figures except to say orders in Beijing exceeded 10,000 units. (Chinese article) Meantime, another article is quoting China Telecom saying first-day online orders were strong, but there was no unusual activity at a China Telecom store also taking orders. On the whole, this looks like a relatively strong launch for China Telecom, which shouldn’t come as a surprise as many iPhone lovers are probably excited to finally have an alternative to Unicom, which had a monopoly on official iPhone sales in China since Apple launched the popular smartphones in 2007. I would expect China Telecom iPhones to see brisk sales when they officially become available on Friday, as consumers test the China Telecom service against Unicom’s. Word of mouth will be critical going forward, as I could easily see many iPhone users migrating to one service or the other in the months and years ahead depending on which telco gets the better reputation for iPhone service. Based on my limited knowledge, I wouldn’t be surprised to see China Telecom emerge as the early leader in the comparisons, in what would obviously be a major setback for an already-struggling Unicom. Meantime, China Mobile (HKEx: 941; NYSE: CHL), China’s only telco with no iPhone deal, is coming out with its own iPhone statistics, with Chairman Wang Jianzhou saying it has 15 million iPhone users. (Chinese article) Of course everyone knows that all of those users are unofficial, since China Mobile has no agreement with Apple, and all can only use their iPhones on China Mobile’s slower 2G network, since no iPhone is available to run on the homegrown technology in its 3G network. China Mobile at one point was talking to Apple about developing a 3G iPhone for its network, but those talks seem to have died a few months ago, meaning the company won’t have its own iPhone deal until 4G which is still at least 1 to 2 years off.

Bottom line: China Telecom is likely to emerge the victor in a looming iPhone war with Unicom by offering both better prices and service.

Related postings 相关文章:

◙ Price War Brewing for iPhone in China iPhone价格战料在中国打响

◙ New Developments, Including iPhone Deal, Heat Up 3G, 4G 中国电信iPhone销售和日益升温的3G、4G最新进展

◙ China Mobile: Improvement Ahead Under New Leaders 新领导有望助中国移动复苏

Dangdang, GOME In New Alliance, More to Come 国美携手当当网 或开启类似合作序幕

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I’ll close out the week with a couple of Internet items, starting with a tie-up between home electronics retailer GOME (HKEx: 493) and e-commerce specialist Dangdang (NYSE: DANG), both top firms in their spaces, that has the online world buzzing. The other deal involving a small European acquisition by Internet leader Tencent (HKEx: 700) also looks interesting, mostly because it represents one of the company’s first steps into more developed western markets. Let’s start with the GOME-Dangdang deal, which is still unconfirmed but presumably would see the former move most of its online operations onto the latter’s platform. (Chinese article) This kind of tie-up could be the wave of the future, allowing traditional retailers like GOME to focus on their core real-world shops while letting e-commerce specialists like Dangdang handle their online business. We saw a similar tie-up a couple of weeks ago at Dangdang rival 360Buy, which sold a limited number of cars online in a highly successful tie-up with Mercedes Benz. These kinds of tie-ups could work to everyone’s advantage by helping companies focus on their core business while outsourcing related ones to partners, lowering costs and perhaps cooling down an overheated e-commerce market racked by rampant competition and soaring costs. These kinds of tie-ups will play to the advantage of big players like Dangdang, 360Buy and Alibaba’s Tianmao, formerly called Taobao Mall, forcing many smaller players out of business. Moving on to Tencent, media are reporting the company has acquired ZAM Network, a European site specializing in news and online community for gamers. (English article) The fact that no price was given tells me this deal was relatively small, probably less than $20 million. Nevertheless, it still looks interesting as cash-rich Tencent looks to leverage its expertise as a gaming and community development expert into a western market, following its recent string of similar small acquisitions mostly in developing markets. I like Tencent’s overseas acquisitions approach, as it focuses mostly on smaller targets in areas related to its core strengths as an operator of Internet communities. I get the sense that Tencent is still trying to figure out how to become more active in helping its acquisitions to grow and integrate them into its own operations, which is always a challenge but can offer big rewards if done properly. This latest buy could signal a more aggressive advance by the company into more lucrative but also more competitive western markets, with an eventual aim for tying these offshore assets together more closely with the parent company to create a global network of online community specialists.

Bottom line: A new alliance between electronics retailer GOME and Dangdang could mark the start of a wave of similar tie-ups, helping to lower costs and cool down the overheated e-commerce space.

Related postings 相关文章:

◙ Group Buy Clean-Up Grows, E-Commerce Next 团购行业洗牌加剧，下一个是电子商务

◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重

◙ E-Commerce: 360Buy Explores IM, Wal-Mart Gets Serious 京东商城内测即时通讯工具,沃尔玛有意控股一号店

 

Debut Offshore IPO Looks Weak, But Not So Bad 阳光油砂上市首日表现差强人意

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When is a 3 percent decline in the first trading day for a newly listed company a good thing? The answer is: When you’re debuting into one of the weakest IPO markets for Chinese companies listing overseas since the global financial crisis of 2008. I find it interesting that media reports are calling the Thursday debut for Sunshine Oilsands (HKEx: 2012) weak, after shares of the China-invested Canadian energy firm fell 3 percent on their first trading day as they became the first major Chinese IPO in an overseas market for 2012. (English article) I say that because the debuts for most Chinese firms listing overseas have been far worse in the last few months, amid a confidence crisis following a series of accounting scandals for US-listed Chinese firms starting nearly a year ago. The height of the crisis saw a number of firms delay their US and Hong Kong IPOs last fall, as investor sentiment tanked. Online video specialist Tudou (Nasdaq: TUDO), one of the few companies that went ahead with its New York IPO despite the terrible sentiment, saw its share tumble nearly 12 percent on their first trading day in August, and new offerings have disappeared since then. So against that backdrop, a 3 percent decline doesn’t look so bad, especially considering that the broader Hang Seng Index, the main indicator for Hong Kong stocks, also fell 1.5 percent on Thursday, taking a breather after a strong rally to start the year. I haven’t had a close look at Sunshine Oilsands’ financials, but as a company in the relatively risky oil sands business it certainly doesn’t look like a guaranteed winner over the longer term, especially if oil prices come down below the $80 mark in the next year. That reality, along with continued investor caution about China stocks in general, led Sunshine shares to price near the lower end of their indicated range, again a sign that doesn’t look too encouraging. But one has to look at the bigger picture here, namely the fact that the IPO actually made it to market at all and managed  debut roughly in line with the broader market. In the current climate, that looks like a positive start to me, and the latest sign that the confidence crisis has bottomed out and positive investor sentiment is starting to return. (previous post) A bigger test could come in the weeks ahead if and when 3 Chinese firms, Internet companies Shanda Cloudary and Vipshop, and car rental specialist China Auto make their debuts after filing in recent weeks for New York IPOs. The 2 Internet offerings will be especially challenging, as both companies are losing money. But if even 2 of the 3 can make it to market and post flat to modestly-down trading debuts, it could be time to officially call a bottom to last year’s confidence crisis.

Bottom line: The first successful overseas IPO of a major China-backed firm this year, despite a weak pricing and debut, is the latest sign that investor confidence is returning to such stocks.

Related postings 相关文章:

◙ Confidence Crisis Easing For US China Stocks 中国概念股信任危机缓和

◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划

◙ AsiaInfo Bidding War Erupts, More to Come 亚信联创收购战打响

China I-Banks Zero In on Piper Jaffray 中国投行聚焦美国派杰

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I’ll start off this Friday with a couple of interesting items on Sino-foreign tie-ups involving financial firms, one involving Piper Jaffray (NYSE: PJC), a boutique US investment bank with a history in China, and the other involving another US firm in a new partnership with UnionPay, China’s dominant electronic transaction specialist. Let’s look at Piper Jaffray first, as that’s the most intriguing of the 2 developments, with shares of the company jumping as much as 10 percent after US media reported it had been approached about a buyout from an unnamed Chinese company. (English article) Piper Jaffray responded with a statement saying it intends to remain independent for now, cooling down its shares which ultimately ended up a more modest 2.6 percent in Thursday New York trade. (company statement) As a US-based niche player with a relatively modest market cap of $500 million and a decade of experience helping Chinese tech companies go public in the US, Piper Jaffray does indeed seem like the perfect acquisition target for a Chinese financial company looking to expand its reach abroad. Potential Chinese buyers would include Bank of China (HKEx: 3988; Shanghai: 601398) and ICBC (HKEx: 1398; Shanghai: 601398, as well as CICC, the nation’s largest investment bank, all of which have signaled they would like to expand their investment banking activity abroad. Piper Jaffray’s lack of denial means it has probably been approached by one or more of these players, and I expect this story isn’t finished yet, with potential for a bidding war to break out. Meantime, another US company named WorldPay has signed a deal that will allow Chinese buyers to purchase goods in the US and most of Europe over the electronic payments network operated by UnionPay, China’s dominant player in electronic financial transactions. (company announcement) This deal looks interesting as much for UnionPay as it does for WorldPay, as it opens up huge new possibilities for Chinese merchants to purchase goods from sellers in the US and most of Europe — something that is now difficult for most Chinese firms due to China’s strong currency controls. UnionPay has been aggressively expanding abroad through a number of tie-ups with major banks in recent years, but this is one of the biggest e-payments deals to date, and I suspect it will be followed by more in the year ahead. This rapid build-up is undoubtedly being encourage by Beijing, and I predict we will see an IPO, most likely in Hong Kong and Shanghai, for UnionPay either this year or next, providing an interesting alternative for investors who want to buy into China’s financial services sector with the risk of owning shares of a big state-run bank.

Bottom line: A bidding war between Chinese buyers could soon erupt for investment bank Piper Jaffray, while UnionPay’s new US tie up is the latest step in an accelerating global expansion.

Related postings 相关文章:

◙ Bank of China Considers Offshore I-Banking 中国银行考虑收购RBS投行资产

◙ Bocom Chases Global I-Bank Business With Big Bucks 交通银行打算花大价钱吸引投行人才

◙ New UnionPay Tie-Up Boosts US Presence in IPO Run-up 中国银联携手US Bancorp 未来有望两地上市