Bottom line: China’s award of a big US high-speed rail contract reflects improving high-tech ties the 2 sides hope to build in an upcoming presidential summit, which could help prospects for a sale of US chipmaker Atmel to China’s CEC.
Xi Jinping heads to Washington
A couple of Sino-US deals from the sensitive high-tech space are in the news today, ahead of a summit between Presidents Xi Jinping and Barack Obama that could ease some of their recent bilateral tensions over technology issues. Leading the headlines is a breakthrough deal that will see leading Chinese high-speed rail company CRRC (HKEx: 1776; Shanghai: 601776) help to build a planned line linking the western US cities of Las Vegas and Los Angeles.
While timing of that announcement looks squarely tied to the Xi visit and should be welcome by both sides, the second looks more controversial since it could see a mid-sized US chipmaker bought by a Chinese company. That deal, which was disclosed by unnamed sources, would see the state-owned China Electronics Corp (CEC) purchase Atmel (Nasdaq: ATML), in a deal that could value the latter at more than $3 billion. Read Full Post…
A brewing spat between security software giant Qihoo 360 (NYSE: QIHU) and struggling smartphone maker Coolpad (HKEx: 2369) has provided some good entertainment for followers of China’s vibrant Internet sector over the last few weeks. The tale has all the elements of a good trashy romance novel, including a love triangle and vengeful scheming by China’s most famous Internet bad-boy.
But more fundamentally, the tale is also filled with valuable lessons for anyone doing business in China’s high-tech sector, or really in any of the country’s emerging industries where private entrepreneurs are driving the growth. The story’s biggest moral is to be careful when choosing your business partners – a lesson that many private investors have learned over the last 3 decades as China transforms from a socialist system to a market-oriented economy. Read Full Post…
The following press releases and media reports about Chinese companies were carried on September 18. To view a full article or story, click on the link next to the headline.
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China Electronics in Talks to Acquire US Chipmaker Atmel (Nasdaq: ATML) （English article)
Alibaba’s (NYSE: BABA) Rise and Fall: What Comes After the Historic Wipeout? (English article)
Rail Giant CRRC Ramps up Overseas Drive as Unit Signs Las Vegas-LA Deal (English article)
Yingli (NYES: YGE) Signs Its Largest Solar Panel Supply Agreement to Date in China (PRNewswire)
Baidu (Nasdaq: BIDU) to Sell Off Music Unit Amid Copyright Difficulties – Source (Chinese article)
Bottom line: New Hong Kong IPOs by CICC and China Re are likely to move ahead and receive solid but not extremely strong demand, though a resumption of new listings in China might not occur until early next year.
New listings set to resume in HK
New signs are emerging of an upcoming resumption for China company IPOs, which have come to a standstill these last few months due to huge stock market volatility. The latest signs of new life are coming from 2 major financial services firms, with investment bank CICC and insurance giant China Re reportedly set to meet securities officials in Hong Kong this week. Both companies filed for Hong Kong listings earlier in the summer, but later went quiet as investor appetite for new shares was quashed by huge volatility on Chinese and Hong Kong stock markets.
This latest activity comes just a week after we saw similar signs of life in both Hong Kong and China. One of those saw outdoor advertising specialist Focus Media take steps for a backdoor listing in Shenzhen, while the other saw snack food giant Liwayway also take initial steps for a Hong Kong listing in the next 6 months. The activity led me to call on China’s securities regulator to quickly lift its current temporary ban on new IPOs as soon as the current market volatility subsides. (previous post) Read Full Post…
Bottom line: A threat to privatize Baidu by chairman Robin Li is probably the result of frustration at recent declines in the company’s stock and is unlikely to result in a serious buy-out bid.
Frustrated Robin Li threatens Baidu privatization
The biggest privatization threat to date by a US-listed Chinese company has just come from online search leader Baidu (Nasdaq: BIDU), whose chairman Robin Li is joining a growing chorus of executives who say their shares are underappreciated by Wall Street investors. In this case it’s easy to see why Li is unhappy, since Baidu’s stock has lost a quarter of its value since July, when the company reported a spending binge on new businesses had sapped its profits.
Baidu’s shares were actually down by an even greater 30 percent at the start of this week, but surged 6 percent in the latest session amid a broader rally for Chinese Internet stocks. It should come as no surprise that the US surge was sparked by a rally earlier in the day on China’s domestic stock markets, which is where Baidu and many of its other US-listed Internet peers say they would like to re-list. Read Full Post…
Bottom line: Stiff restrictions on private investment in Chinese financial services will hobble a new insurance tie-up for Ant Financial, and were likely a big factor behind the resignation of the head of Tencent’s young WeBank.
WeBank chief resigns
China’s 2 largest Internet companies are in the headlines for major new moves in financial service, reflecting the rapidly evolving picture for this newer part of their business. Alibaba (NYSE: BABA) was in the headlines for more positive developments, as its affiliated Ant Financial unit announced a new insurance tie-up with Cathay Financial (Taipei: 2882), one of Taiwan’s leading financial services companies. The news was less upbeat for Tencent (HKEx: 700), with word that the head of its young WeBank was leaving just 9 months after the bank’s launch.
Both of these stories reflect the huge potential financial services hold for big private companies like Alibaba and Tencent, as Beijing opens the sector to private investment. But at the same time, the newness of the opening means that many rules are unclear and sometimes even contradictory. Tencent has learned that lesson quickly with WeBank, which has faced major limitations in its early days. Read Full Post…
The following press releases and media reports about Chinese companies were carried on September 17. To view a full article or story, click on the link next to the headline.
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CICC, China Reinsurance Prepare for HK IPO Hearings on Thursday – Source (Chinese article)
Uber Rival Lyft Teams With China’s Didi Kuaidi (English article)
Baidu (Nasdaq: BIDU) Could De-List From NY, Re-list in China – Chmn (Chinese article)
Xiaomi Rolls Out Trolley-Style Suitcase for 299 Yuan (Chinese article)
Bottom line: Contention around Meituan’s new mega-funding and Ele.me’s urgent desire to sell itself reflect overheated competition in the O2O restaurant services market, which could result in a major shake-up over the next 12 months.
Meituan denies rumors of funding collapse
Just a couple of days after reports emerged about the latest fund-raising by leading group buying site Meituan, the newest reports are painting a more chaotic scene in the sector for online-to-offline (O2O) services involving collaboration between web sites and restaurants. Meituan is once again in the news, though this time it’s denying rumors that its latest fund-raising has collapsed. Meantime, take-out dining delivery specialist Ele.me is also reportedly in frantic need of cash due to stiff competition gobbling up the industry.
This pair of stories reflects a cycle that’s all too common for emerging industries in China. That cycle typically sees one or two companies find success in a new business area, sparking a gold-rush that sees many others rush into the space. The result is always a surge in overcapacity, which is almost always followed by a shake-out that sees most companies close or withdraw from the business. Read Full Post…
It’s a quiet day on China’s corporate news front, as many companies stay silent and hope that the latest sell-off on the nation’s stock exchanges calms as the week progresses. So in the absence of major news, I thought I’d look at the latest Hollywood tie-up involving Youku Tudou (NYSE: YOKU), and do some reading between the lines about what it means for the struggling online video company.
The thing that most caught my attention about this latest licensing deal between Youku Tudou and Paramount Pictures was how passe it seemed. Youku Tudou and its rivals were frequently making this kind of announcement a couple of years ago, when they were trying to secure premium content that web surfers would pay to watch on their sites. But nowadays such deals don’t seem like big news anymore, and instead companies are focused on creating their own exclusive content. Read Full Post…
The following press releases and media reports about Chinese companies were carried on September 16. To view a full article or story, click on the link next to the headline.
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Carmakers Curb China Output as Sales Growth Stalls (English article)
Tencent (HKEx: 700) to Invest 2 Bln Yuan in Cloud Unit Over Next 12 Months (English article)
Meituan Denies Rumors of Failure for Latest Funding Round (Chinese article)
Bottom line: Alibaba’s shares will remain under pressure through at least the end of the year, but could rebound after that and return to their IPO level or higher in 2016 as the bears lose interest and move on to their next victim.
Bears feast on Alibaba stock
Everyone has their good years and their bad ones, and 2015 is definitely shaping up as a year that e-commerce leader Alibaba (NYSE: BABA) would rather forget. After wowing investors with a record-breaking IPO a year ago, the company’s stock has been mauled in 2015 by a large stable of hungry bears, including the latest that emerged over the weekend in a report saying Alibaba stock could tumble further still.
That report from the well-respected financial magazine Barron’s sparked another sell-off for Alibaba’s shares when the new trading week began, pushing them close to record lows, even as the company issued a detailed rebuttal. I’ve had a look at Alibaba’s statement, and many of its points are legitimate though they do seem to miss the big picture. Read Full Post…
