SMARTPHONES: Xiaomi Eyes IPO, Gets Setback in Europe

Bottom line: Xiaomi’s growing comeback is giving it confidence to launch an IPO plan, as its loss of a trademark case in Europe highlights renewed obstacles it will face in its global expansion.

Xiaomi eyes Hong Kong IPO

Comeback kid smartphone maker Xiaomi is in a couple of headlines as we reach the middle of the week, including one that highlights its return to growth and another that shows the obstacles it will face as it continues with its global expansion. The first headline has media reporting that Xiaomi is planning an IPO as early as next year, as its sagging valuation finally returns to a growth track. The second has the company suffering a setback in Europe related to a trademark dispute with industry colossus Apple (Nasdaq: AAPL), highlighting the perils it is likely to face as its global expansion moves into more developed western markets.

It’s still a bit early to say whether Xiaomi’s comeback story has legs, though growing signals are certainly pointing in that direction. I know at least one person who is a Xiaomi fan and goes out of his way to buy their phones, which means that at least some people are coming back to the brand. That’s a shift from a couple of years ago, when the company’s legions of early fans abandoned the brand after it lost its early trendy image and became more known for product problems and other glitches. Read Full Post…

INTERNET: Google, Apple and More Flock to China Internet Pow-Wow

Bottom line: Attendance of Google’s CEO at China’s premier Internet event marks a continuation of its slow return to China, while appearances by top Apple, Qualcomm and Microsoft executives are more expected.

Western tech execs hobnob at Internet conference

As we head into the new week, the headlines are filled with the latest words of wisdom on the future of the Internet from some of China’s leading company chiefs, who were all in the scenic city of Wuzhen for a major conference that kicked off over the weekend. But equally interesting were the guest list of foreign big-wigs in attendance,  which included top executives from Google (Nasdaq: GOOG), Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT), Cisco (Nasdaq: CSCO) and Qualcomm (Nasdaq: QCOM), among others.

This is the third year for the show, which I previously pooh-poohed as a show of pageantry without too much substance. But it does appear to be gaining a bit of traction over time, and I suppose I should grudgingly admit that perhaps China should have a greater say in the development of the Internet and that these major players are at least partly right to be attending in high-profile roles. After all, China is easily the world’s largest Internet market with more than 700 million users. Read Full Post…

TELECOMS: 5G Buzzes Early Into China

Bottom line: A bevy of signals from Beijing indicate China will roll out 5G networks around 2020, in step with major Western markets, providing a boon for telcos, equipment sellers and Internet companies.

China gets serious on 5G

After years of watching China following years behind the West in rolling out its next-generation wireless networks, there are growing signs that the country intends to be a leader rather than a laggard with upcoming 5G service. The latest signal in that drive is coming from the country’s state planner, which has just announced that five or more cities will start to build rudimentary 5G networks starting next year.

All this may sound quite boring for many of my readers who are more interested in high-tech companies than stodgy telecoms carriers. But it really has huge implications for not only China’s big 3 telcos, but also the nation’s booming Internet industry that will become the direct beneficiaries of 5G networks that offer data speeds that are well ahead of what you can get from current 4G technology. Read Full Post…

BUYOUTS: eHi Prepares to Drive Off, Jumei Bid Unravels

Bottom line: A third-party buyout offer for eHi could presage a wave of similar new bids for undervalued, profitable Chinese companies, while withdrawal of Jumei’s buyout bid could be followed by a new, lower offer.

eHi gets buyout offer

After a period of relative quiet, the privatization wave that swept US-listed Chinese companies nearly two years ago is bubbling back into the headlines with a couple of stories from different directions. In the “leaving” direction there’s car rental comp eHi Car Services (NYSE: EHIC), which has received a third-party offer to privatize for a slight premium to its latest stock price. In the other direction there’s cosmetics e-commerce firm Jumei International (NYSE: JMEI), which is finally withdrawing its management-led buyout offer nearly two years after first receiving the bid.

There’s no broader theme to these two deals, except perhaps that investors have become quite skeptical about such offers. The Jumei deal’s collapse shows why such skepticism is sometimes merited, though it’s also worth pointing out that about two-thirds of US-listed companies that announced plans to privatize during the wave in early 2015 actually completed those plans. Lackluster response to the eHi deal also shows a certain skepticism, probably because shareholders are still worried that many of these buyout bids are low-balling companies’ real values. Read Full Post…

INTERNET: Tencent Rockets Up Global Tech Value Charts

Bottom line: Tencent and Alibaba stocks have become overvalued at current levels compared with global peers, and are due for a pullback of up to 30 percent in 2018.

Tencent looks frothy at current levels

Much ado is being made about the meteoric rise in value for Tencent (HKEx: 700), the Chinese social media giant that is now neck-and-neck with global heavyweight Facebook (Nasdaq: FB). Specifically, the pair now boast nearly identical market values in the $520-$530 billion range, which one report points out is larger than the entire GDP of Taiwan. That makes them the world’s fifth and sixth largest companies by market cap.

Such a reality would have been unthinkable just four or five years ago, when the only Chinese companies that ever periodically made the global top 10 were big state-run firms like banking giant ICBC (HKEx: 1398), which were government owned behemoths operating in highly protected sectors. Tencent breaks that pattern, as the company is most decidedly private, and also operates in a highly competitive but also high growth area in the online realm. Read Full Post…

FINANCE: Fintechs Sink on Regulatory Clampdown

Bottom line: A new crackdown on microlenders could put a slight damper on their growth, but is unlikely to affect them significantly next year unless China experiences a bad debt crisis.

Beijing clamps down on microlenders

Word that China will clamp down on the nation’s thriving field of online microlenders is sending a chill through the sector, as many predict new moves could severely slow down their breakneck growth. The newly-announced crackdown is only aimed at new microlenders, at least for now, with word that the central government has ordered all provinces to immediately stop issuing new licenses for such companies. (English article)

But like everything else in China, where there’s smoke there’s often fire not far behind. In this case, market watchers and participants are expecting this sudden freeze in new licenses is a prelude to a bigger clampdown, which is probably sorely needed. The explosion in microlenders over the last two or three years really does seem a bit out of control, and Beijing is clearly worried about the possibility of mass defaults due to poor risk management in this fledgling industry. Read Full Post…

RETAIL: Alibaba Boosts Grocery Rush with Sun Art Investment

Bottom line: Alibaba’s new investment in grocery operator Sun Art looks like a shrewd move into an area where logical synergies between online and offline shopping can be achieved.

Alibaba buys into Sun Art

After a period of relative quiet, e-commerce giant Alibaba (NYSE: BABA) is splashing back into the major M&A headlines with its purchase of a major stake in grocery retailer Sun Art (HK: 6808) for HK$22.4 billion ($2.9 billion). This particular deal looks strikingly similar to an earlier tie-up between Alibaba’s archrival JD.com (Nasdaq: JD), which is joining online and offline grocery carts through its own older tie-up with Walmart (NYSE: WMT).

Each of these plays looks relatively savvy, acknowledging that off-line shopping will continue to play a major role in the retail experience for certain products. Alibaba has embraced this online-offline approach with a vengeance over the past year, snapping up a series of existing retail chains and also rolling out its own concept convenience store that is completely automated. Read Full Post…

IPOs: Sogou Makes It to Market, But Will It Sell?

Bottom line: Sogou is unlikely to shed its position as a second-tier search engine anytime soon, despite its ties to Tencent ties, and its stock is also unlikely to be a strong performer over the next 2-3 years.

Sogou pops on debut, but will it hold?

After writing about up-and-coming hot new names like Qudian (NYSE: QD) and ZhongAn Insurance (HKEx: 6060) making blockbuster IPOs over these last few weeks, it feels a bit like going back to the future by writing today about a new listing for search engine Sogou (NYSE: SOGO). The fact of the matter is that Qudian, ZhongAn and just about all of the companies listing in this current wave of IPOs didn’t even exist when Sogou was born, and many of their founders were probably still in college or perhaps younger.

Anyone out there sensing just a tiny bit of skepticism from what I’ve just written isn’t just imagining things. As a longtime China tech reporter, I remember meeting with Charles Zhang, founder of Sogou’s parent Sohu (Nasdaq: SOHU), more than a decade ago, at which time he told me about all the great things in store for his then-fledgling search engine. Fast forward to the present, when it doesn’t seem like much has changed, including Sogou’s ongoing status as a niche player in China’s massive search market. Read Full Post…

INTERNET: Sina Pledges Change, But Then Disses Shareholders

Bottom line: The intensifying spat between Sina and a dissident shareholder is likely to ultimately cool down without any legal action, and could see the addition of 1-2 new independent directors to its board.

Sina-Aristeia tussle headed for court?

The battle for reform at Internet stalwart Sina (Nasdaq: SINA) has taken a somewhat nasty twist, with a dissident shareholder threatening legal or other action following a power play by longtime CEO Charles Chao to deprive minority shareholders of influencing the company through use of the ballot box. This particular move doesn’t come as a huge surprise, as it’s quite typical of Chinese CEOs like Chao to believe they know what’s best and do their utmost to ignore anyone who disagrees with their view.

That said, Chao did sound a slightly conciliatory note in this battle for reform, which is being led by a dissident minority shareholder called Aristeia Capital. I’ll go into that shortly, though first we should review this colorful battle and also what it might mean for Sina. The company’s share price has taken a bit of a beating these last few weeks and is now down around 8 percent amid all the brouhaha. Read Full Post…

IPOs: Hexindai Jumps in Trading Debut, as Fintechs Stay Warm

Bottom line: The wave of strong sentiment for new offshore IPOs by Chinese companies is running out of steam, but listings before year-end could still get a slight left, especially fintechs.

Hexindai jumps on trading debut

Fintech is hot, and just about everything else is not. That appears to be the message with the latest offshore IPO by a Chinese firm, this time from Hexindai (Nasdaq: HX), a peer-to-peer (P2P) lender that takes in money from small investors and then lends it out to borrowers. Hexindai’s shares initially soared as much as 70 percent in their trading debut before finishing a much more modest but still comfortable 20 percent higher.

We’ll review the latest offshore IPO by a Chinese company in more detail briefly, but I thought this would also be a good opportunity to do a scorecard for a broader flurry of deals that has hit the market in the last month or two to see how they’re doing. The bottom line seems to be quite clear: IPOs from this new generation of financial technology companies, or fintech, are generally doing ok, while just about everyone else is now below their IPO prices. Read Full Post…

SMARTPHONES: Apple Finds Its China Mojo as Xioami Moves Up

Bottom line: Apple should be able to extend its return to growth in China into at least one more quarter, while Xiaomi should also be able to continue posting strong double-digit growth for the next year.

Apple returns to China growth

Apple (Nasdaq: AAPL) has just released its latest quarterly results that show China is back on a growth track, quieting skeptics who had said its latest iPhone was debuting to mostly snoozes in the world’s largest smartphone market. On a broader basis, IDC has also just announced its global figures for third-quarter smartphone sales, showing Huawei continues to creep up on Apple and could well take the global No. 2 spot from its U.S. rival over the next year if current trends continue.

Last but not least is China’s own Xiaomi, which is catching people’s attention again with the strongest growth of any global players in the third quarter, consolidating its position as the world’s fifth largest player. It’s probably too early to say that Xiaomi’s comeback story has legs. But the company is the only one posting triple-digit growth among the top 5 in the latest quarterly results, a distinction previously reserved for Huawei and Chinese rival  Oppo. Read Full Post…