Bottom line: High-flying video player maker Baofeng represents the irrational sentiment now pervading China’s stock markets, and its recent layoffs hint at underlying troubles that will undermine the company over the next year.
Baofeng layoffs hint at troubles
When the history books are written, video player maker Baofeng Technology (Shenzhen: 300431) could well become the poster child for China’s version of the dot-com bubble that saw the country’s stock markets soar and then crash in 2014 and 2015. In the latest twist on Baofeng’s story, the company has reportedly just laid off 30 percent of its workforce, in what looks like signs of major problems.
But rather than tumble on the reports, the company’s stock actually rose by the daily 10 percent limit in the latest trading session at the end of last week. It’s not completely unheard of for companies’ stocks to rise after layoffs are disclosed, even though the job cuts really do look like a sign of major troubles brewing at Baofeng. But in China, no one really seems to ever read beyond the headlines, and often they don’t even bother reading the headlines at all. Read Full Post…
In my native US a telltale sign of a neighborhood in decline is the appearance of wig stores and pawn shops on the local streets. In big Chinese cities like Shanghai, the equivalent seems to be the appearance of makeshift shops and stalls selling old appliances and spare machinery parts. I visited one such Shanghai neighborhood this past week, my curiosity piqued after reading that the historic Dongjie flea market near the Bund was set for demolition.
I’m usually a big supporter of neighborhood preservation, especially when it involves old buildings, as I think such work helps to define a city’s distinctive character and local culture. But in this case there really wasn’t much to be saved at Dongjie, a fact that many of the merchants who face imminent displacement seemed to acknowledge. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 24-26. To view a full article or story, click on the link next to the headline.
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Tesla (Nasdaq: TSLA) CEO Says Negotiating with China on Local Production (English article)
Bottom line: Xiaomi’s first-ever quarter-to-quarter sales decline means it’s unlikely to meet its 2015 sales target, while Apple’s latest environmental announcement is part of a broader image-polishing campaign in China that seems to be working.
Xiaomi posts first-ever sales drop
You don’t hear sputtering smartphone maker Xiaomicomparing itself to former role model Apple(Nasdaq: AAPL) too much these days, but both companies are in the headlines today as each pursues its own different agenda. An increasingly desperate-looking Xiaomi is reportedly eyeing the US, as the former high-flyer notches its first-ever quarter-on-quarter decline in smartphone shipments. Meantime, Apple is turning up its China public relations machine with announcement of a major expansion of its environmental protection campaign in the heavily polluted country.
Xiaomi and Apple were often mentioned in the same sentence as recently as last year, when the former was one of China’s hottest companies and pegged by some to become the nation’s first global smartphone brand. During that time Xiaomi’s talkative chief Lei Jun liked to compare his company to Apple, resulting in a war of words at one point after Apple’s chief designer accused Xiaomi of being a copycat. Read Full Post…
Bottom line: STO’s backdoor listing and Wumart’s pending de-listing reflect the rise in China of e-commerce, which is boosting delivery companies like STO and undermining traditional retailers like Wumart.
STO delivers back-door IPO
A couple of listing stories are shining a spotlight on China’s rapidly changing retail landscape, which is seeing consumers migrate en masse to e-commerce from traditional shops. The e-commerce boom has fueled a parallel explosion in demand for delivery services, and now one of the largest private couriers, STO, is getting set to make a backdoor listing. On the other side of the shopping aisle are struggling traditional retailers like Wumart (HKEx: 1025), which is reportedly getting ready to abandon its longtime Hong Kong listing through a privatization bid.
This pair of stories also reflects a few other emerging trends for publicly traded Chinese companies, including a growing preference for domestic listings compared with an earlier one for offshore IPOs in places like Hong Kong, New York and Singapore. Shenzhen in particular is fast emerging as a hot spot for high-growth companies to list, thanks to rapid growth in the 5-year-old Nasdaq-style ChiNext board. That trend is likely to continue with plans for a similar board in Shanghai, which could reportedly launch as soon as next year. Read Full Post…
Bottom line: A growing alliance between JD.com and Tencent could start to seriously challenge Alibaba’s dominance of China e-commerce in the next 2 years, as the rivals use the upcoming November 11 Singles Day to showcase their prowess.
JD joins Nov 11 courtship of online shoppers
This year’s November 11 Singles Day shopping extravaganza is shaping up as a guerrilla courtship of Chinese online shoppers by the nation’s 2 e-commerce leaders, as each vies for supremacy on a date that’s become the world’s busiest for online buying. Just days after leading operator Alibaba (NYSE: BABA) announced its own grand plans to seduce shoppers, rival JD.com (Nasdaq: JD) has come out with its own counter scheme that aims to court China’s hordes or singles in an alliance drawing on its growing ties with leading social networking (SNS) operator Tencent (HKEx: 700).
The stakes in this brewing war are huge. Last year alone, Alibaba reported 278 million orders worth $9.3 billion around the promotion that it created on the November 11 holiday, which represents the epitome of singledom due to its numerical representation as 11-11, or four 1’s. JD declined to give a sales value for its orders last year, but said it posted 14 million orders, which would translate to far more modest but still significant sum of about $500 million worth of merchandise sold based on Alibaba’s rate. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 23. To view a full article or story, click on the link next to the headline.
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Wumart Stores (HKEx: 1025) to Private, De-List as Trading Resumes (Chinese article)
Apple (Nasdaq: AAPL) Launches New Clean Energy Programs in China (Businesswire)
Xiaomi Smartphone Shipments Fall for First Time Q/Q, Eyes US (Chinese article)
TAL Education Announces Unaudited Fiscal Q2 Results (PRNewswire)
STO Eyes Backdoor Listing, to Become First Listed Private Delivery Firm (Chinese article)
Bottom line: Tim Cook’s latest trip to China and Google’s new investment in a Chinese voice recognition technology firm reflect efforts by both to build up app-making infrastructure to thrive in the increasingly important market.
Google invests in voice technology firm
Leading high-tech giants Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) are both in the China headlines today, led by the third visit this year to the country by Apple CEO Tim Cook to promote app development for his company’s iPhones. Meantime, Google is in the headlines for its new investment in a fast-growing maker of an app that uses voice recognition technology, which many companies believe will be central to mobile devices of the future.
Neither of these stories is huge and instead both are mostly incremental, underscoring the growing importance that China is playing in the global market for high-tech gadgets. In recognition of that fact, Apple realizes it needs to build a robust field of locally-based app developers to make sure its iPhones can maintain their place in the world’s largest smartphone market. Read Full Post…
Bottom line: Tsinghua Unigroup could be quietly helping to bankroll Western Digital’s bid for SanDisk, as part of its vision of building a Chinese NAND memory powerhouse that could challenge Samsung.
Unigroup bankrolling Western Digital’s SanDisk bid?
I don’t consider myself a conspiracy theorist, but a sudden flurry of multibillion-dollar memory chip deals all involving Tsinghua Unigroup is certainly catching my attention. Just a day after global chip giant Intel (Nasdaq: INTC) announced a $5.5 billion investment that looked related to Unigroup, we’re seeing yet another similarly large deal that has some indirect ties to this Chinese company linked to the nation’s top science institution, Tsinghua University.
This latest new deal will see hard disk maker Western Digital (Nasdaq: WDC) buy flash memory maker SanDisk (Nasdaq: SNDK) in a cash and stock deal worth $19 billion. (English article; Chinese article) China watchers will recall that announcement of this deal comes just 2 weeks after a Unigroup affiliate paid $3.8 billion for 15 percent of Western Digital. (previous post) I theorized a short time later that Unigroup’s sudden thirst for memory could even prompt it to make a play for storage device giant EMC (NYSE: EMC), which is in the process of being acquired by Dell in a blockbuster deal worth $67 billion. (previous post) Read Full Post…
Bottom line: CICC’s IPO will price and debut weakly due to uncertainty about its prospects following recent management turmoil, though the stock could do well over the longer term if its new executive team performs well.
Investor unimpressed by CICC offering
Chinese investment bank CICC is quickly discovering just how much its fortunes have faded, with word the former financial superstar has scaled back its Hong Kong IPO by 20 percent due to lack of investor interest. Just a month or two ago CICC might have been able to blame the lukewarm sentiment on the broader market, as a massive sell-off on China’s A-share markets infected Hong Kong. But strong recent demand for 2 major new listings in Hong Kong shows positive sentiment is returning, and that CICC is being left out of the rebound.
IPOs by Chinese companies have come creaking back to life in Hong Kong lately, led by last week’s strong debut for IMAX China (HKEx: 1970), the Chinese unit of Canadian big-screen theater technology company IMAX (NYSE: IMAX). Since debuting last week, IMAX China shares have risen by a third on big hopes for rapid expansion in China’s theater market. Last week, the stodgier China RE insurance company also priced shares for its upcoming $2 billion Hong Kong IPO at the top of their range, after getting strong demand. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 22. To view a full article or story, click on the link next to the headline.
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Apple (Nasdaq: AAPL) CEO Cook on 3rd China Trip This Year, Meets App Developers (English article)
CMC, Merlin Entertainment to Build China Legoland Park (Chinese article)
China’s CCB (HKEx: 939) Agrees to Buy Majority Stake in LME Ring Dealer Metdist (English article)
Speech Technology Firm Mobvoi Wins $75 Mln Google (Nasdaq: GOOG) Funding (Chinese article)
Trina (NYSE: TSL) Connects Two-Thirds of 300 MW Yunnan Project to Grid (PRNewswire)
