Cleanup Resumes, Facebook Sniffs Out China Investors 在美上市的中国企业将继续面临“大清洗”

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The new year is bringing many questions about the future of US listings for China stocks, but one thing remains quite clear: the cleanup of the sector triggered by a series of accounting scandals last year will continue into 2012, as evidenced by the latest activity. In one of the latest signs of the ongoing cleanup, China CGame (Nasdaq: CCGM) has been notified of its pending de-listing from the Nasdaq due to its failure to hold its annual meeting on time. (Chinese article) The company’s stock  currently trades at just 17 cents per share, meaning it also is well below the $1 level necessary for a Nasdaq listing. In related news, embattled Focus Media (Nasdaq: FMCN), which previously came under attack from short sellers, has come under renewed attack from Muddy Waters, which this time is questioning the company’s purchase of a ginseng plantation. (English article) Focus tried to explain the acquisition by saying it was designed to acquire assets related to its core outdoor advertising business, but that didn’t convince investors, with Focus shares losing 5.4 percent on Friday. Perhaps this transaction is really related to Focus’ core business, as the company says; but the purchase looks a bit similar to one by online game company Giant Interactive (NYSE: GA) in the completely unrelated insurance space last year (previous post), and is symptomatic of the way that many US-listed Chinese companies are run like personal fiefdoms of their founders, who use their companies to play all kinds of investment and financial games. Expect to see more such delistings and short-seller attacks this year as the cleanup continues, though I would expect most activity to end by the middle of the year. In separate unrelated Internet news, Goldman Sachs has apparently begun shopping shares of Facebook to wealthy Chinese investors via a unit of financial services group Ping An in the run-up to Facebook’s highly anticipated IPO. (Chinese article) This kind of activity certainly isn’t that unusual, as Goldman is clearly trying to start creating buzz before the offering. What’s more interesting is that it’s seeking investors in China, providing the latest indication that Facebook still aims to enter the China market and could even make a move here soon to create more buzz for its offering expected in the next few months. Stay tuned.

Bottom line: The latest delisting and short-seller attack against US-listed Chinese firms indicate the cleanup of such companies on US markets will continue through at least the middle of this year.

Related postings 相关文章:

◙ Short Sellers Target China in Year End Assault 做空抛盘年底将矛头对准在美上市中国企业

◙ Rumor Mongers Seize on Crisis With Sina Attack

◙ Despite China Rebuff, Facebook Going Back for More Facebook明知山有虎，偏向虎山行

News Digest: January 7-9, 2012

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The following press releases and media reports about Chinese companies were carried on January 7-9. To view a full article or story, click on the link next to the headline.

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◙ Bank of China (HKEx: 601988), Mizuho (Tokyo: 8411) Eye RBS Bank Assets: Sources (English article)

◙ Tencent (HKEx: 700) Says Qihoo 360 (NYSE: QIHU) Disrupts Tencent App (English article)

◙ Focus Media (Nasdaq: FMCN) Falls After Muddy Waters Questions Ginseng Plantation Buy (English article)

◙ Joy Global (NYSE: JOY) Makes Offer For Int’l Mining Machinery (HKEx: 1683) Shares (Businesswire)

◙ Apple (Nasdaq: AAPL) Near iPhone Deal With China Mobile (HKEx: 941) – Market Talk (Chinese article)

Lenovo Starts Year With New Europe Chief, TV Tie-Up 联想新年新气象：聘用新高管并推互联网电视

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Lenovo (HKEx: 992), the Chinese PC maker that wants to do a lot more than sell computers, is starting off the new year with a couple of positive developments, hiring a sharp new executive to head its important European operations and also launching an interesting new web TV initiative. In the former move, the company has formally hired Gianfranco Lanci, formerly CEO of Taiwan’s Acer (Taipei: 2353) to head its Europe operations under a new reorganization of its global regions. (Chinese article) In fact, this development isn’t huge, as Lenovo actually hired Lanci as a consultant last September (previous post), so clearly they have been happy with his performance since then. I’m a fan of Lanci, who was a major force behind Acer’s rise a few years ago by correctly predicting the importance of mobile computing and stressing development of laptop computers. Of course, Acer has fallen on harder times since then due to lack of focus and innovation, and Lanci left the company last year as a result of differing opinions with other top managers. It’s unclear if Lanci can do the same for Lenovo as he did for Acer, but Lenovo clearly does need some strong leadership in Europe, following its purchase of German PC maker Medion last year and as it tries to boost its presence in developed markets in Europe and North America. (previous post) Meantime, the company has also formed a tie-up with BesTV, the digital TV arm of Shanghai Media Group (SMG), China’s second biggest media group and the main TV operator in the lucrative Shanghai market. Under the tie-up Lenovo is providing set-top boxes that will allow BesTV viewers to surf the web on their televisions. (Chinese article) Like Acer, Lenovo sometimes seems to lack focus in the current digital world, often chasing the latest popular product like smartphones or gaming consoles rather than trying to innovate with its own new bets on hot new product areas. So in that light, this Internet TV initiative certainly seems refreshing as the kind of move one would expect from a leader rather than a follower. I also like the choice of SMG as its partner, as SMG is clearly one of China’s top media groups and could potentially become a leader in China’s nascent digital TV market. All that said, these 2 new moves by Lenovo, with a smart new European head and interesting Internet TV initiative, auger a promising start for 2012.

Bottom line: Lenovo’s hiring of an experienced European head and  a new Internet TV tie-up both look like promising developments as it heads into the new year.

Related postings 相关文章:

◙ Lenovo Considers Japan Production 联想向日本转移制造业务为明智公关手段

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

◙ Lenovo Parent Goes Down to the Farm 联想控股“务农” 瓶装水里淘金

Regulator Eyes Online Video in Ad Crackdown 广电总局或限制视频网站广告

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Chinese regulators seem to have discovered a sudden fondness for the Internet, first saddling many social networking sites with cumbersome “real name” rules and now potentially setting their sights on the fast-rising video-sharing sector. I doubt these 2 initiatives are related, but they both do reflect a worrisome surge in China’s classic heavy-handed approach to fast-rising new industries, which often ends up stunting their development or even killing them outright. In this latest news, Chinese media are reporting that an official at SARFT, the agency that regulates TV, has hinted that tough new requirements limiting the amount of ads that TV stations can show during their programs may also soon be extended to video sharing sites. (English article) The new requirements would come just months after many of China’s leading video sites, including Youku (NYSE: YOKU), Sohu (Nasdaq: SOHU) and Tudou (Nasdaq: TUDO) have signed a series of landmark agreements to offer legally licensed content as they wean themselves from the pirated material that has historically been a mainstay on such sites. (previous post) Thus the new requirements, if they come, would almost look like punishment for this positive development, when instead encouragement should be offered. This new requirement would follow the higher-profile move in December when Beijing issued new rules requiring all social networking sites (SNS) to register users using only their real names. (previous post) That rule dealt a blow to Sina (Nasdaq: SINA), whose wildly popular Weibo microblogging service looks set to become the biggest victim of that new policy. Frankly speaking, I’m not even really sure how dependent the online video sites are on advertising for their revenue, as some of the movies and TV shows offered under these new licensing agreements are on a pay-per-view basis that would see users paying to watch content. But regardless of the current situation, advertising is clearly a potential revenue source as these companies work toward sustained profitability, and any move by regulators to put sharp new limits on this activity could seriously hamper the industry’s development.

Bottom line: Potential new rules limiting ads for online video sites could seriously hamper the industry’s development, hurting their chances for sustained long-term profitability.

Related postings 相关文章:

◙ Tudou, Youku: China’s New Piracy Police　　土豆和优酷：中国打击盗版的民间警察

◙ Jishi the Latest in Low-Key Media Listing Parade 吉视传媒加入中国媒体低调上市大军

◙ Tudou Surprises With Profit, Licensing Deal 土豆网意外扭亏为盈视频分享市场的好兆头

Web Security: Qihoo Sputters, NetQin Surges

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Amid all the recent talk about security due to high-profile breaches at some big-name web firms, 2 of the nation’s top Web security software makers, high-flyer Qihoo 360 (NYSE: QIHU) and laggard NetQin (NYSE: NQ), are seeing some sharp reversals of fortune as investors take a second look at these stocks. We’ll start with Qihoo, clearly the larger and more aggressive of the 2, which has started the new year by announcing a plan to buy back up to $50 million in company shares. (company announcement; Chinese article) The timing of the plan is interesting, as the markets have been relatively quiet in recent weeks compared with the summer and fall when many other US-listed Chinese firms announced similar buy-backs. But a quick look at Qihoo shares reveals its stock is down around 30 percent from its mid-November high, which roughly corresponds to when a small research house named Citron came out with a report saying Qihoo’s user figures were grossly exaggerating and that its stock, then trading in the $20 range, should be valued closer to $5 per share. (previous post) Qihoo denied the claims, prompting Citron to issue another similar report weeks later. Investors seemed to shrug off the initial report, but the recent fall in its price to below $15, which seems to have prompted the buyback, clearly has the company worried that people may finally be waking up to the reality that Qihoo does indeed seem to be prone to exaggeration based on past actions, though obviously I can’t comment on the accuracy of Citron’s claims. Stay tuned for more downward pressure on its shares this year. Meantime, NetQin, a smaller security software firm whose shares have languished since their IPO last May, got a nice boost on Wall Street after announcing a deal to provide software to Motorola Mobility. (company announcement) Its shares rose 16 percent after the news came out, and indeed such a deal shows the company may still have some potential even after reports emerged last year of conflicts with China’s 3 big telcos. Even so, the company’s shares, which now trade at around $6.20, are still down by about half from their IPO level of $11.50, so they still  have a ways to go.

Bottom line: Qihoo shares will come under pressure this year as doubts remain about its credibility, while rival NetQin could get a lift following a new agreement with Motorola.

Related postings 相关文章:

◙ Qihoo, Vancl Fend Off New Attacks 奇虎、凡客和人人承受压力

◙ Netqin Fizzles on Debut, Could Still Have Potential 网秦首秀表现不佳但可能仍具潜力

◙ Report Takes Wind Out of Inflated Qihoo 奇虎遭遇Citron釜底抽薪

News Digest: January 6, 2012

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The following press releases and media reports about Chinese companies were carried on January 6. To view a full article or story, click on the link next to the headline.

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◙ Sinopec (HKEx: 386) Says Ministry of Finance Raises Oil Windfall Tax Threshold to $55 (English article)

◙ SARFT TV Drama Rules May Extend to Online Video (English article)

◙ Lenovo (HKEx: 992) Revamps Regions, Former Acer (Taipei: 2353) CEO To Head Europe (Chinese article)

◙ Qihoo 360 (NYSE: QIHU) Announces Authorization for Share Repurchase (PRNewswire)

◙ Canadian Solar (Nasdaq: CSIQ) and Ningxia State Power Complete 10 MW China Project (PRNewswire)

China Telcos In New Drives at Home, Abroad 中国三大电信运营商海内外发力

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China’s 3 telcos are all in the news in this first week of the new year, with China Unicom (HKEx: 762; NYSE: CHU) making a long-awaited iPhone announcement, while an intriguing newly announced chip could give a big boost to China Mobile‘s (HKEx: 941; NYSE: CHL) 3G service. Last but not least, China Telecom (HKEx: 728; NYSE: CHA) has announced an interesting move abroad, with potentially more to come. Let’s start with Unicom, which after months of delay, will finally start selling Apple’s (Nasdaq: AAPL) newest iPhone 4S on January 13. (English article; Chinese article) This news comes as other media are reporting that Unicom will also soon launch 8 new low-cost smartphones (English article), after the company blamed a shortage of such models last year for its disappointing progress in the 3G space. These latest Unicom developments look like a step in the right direction after a disappointing year in 2011, but I still have big doubts about the company’s ability to execute due to ongoing management turmoil that led it to squander a golden opportunity for growth in 2011. (previous post). Meantime, chip developer Spreadtrum (Nasdaq: SPRD) has announced an interesting new low-cost chip designed specifically for China Mobile, which can handle the company’s homegrown 3G standard, TD-SCDMA, along with its 2G EDGE standard and also wi-fi, which the company is strongly developing. (company announcement; Chinese article) If this chip is good, which looks like a strong possibility, we could soon see a strong new field of low-cost products coming out that could be very attractive for China Mobile customers, helping it to regain some of its lost momentum this year as a new generation of leaders put their mark on the company. (previous post) Finally there’s China Telecom, which will start offering a mobile service under its own name in Britain with plans to expand to France and Germany. (English article) The move will make China Telecom China’s first telco to become a mobile virtual network operator (MVNO), as it looks to cater to the growing number of Chinese living overseas. I applaud China Telecom for its effort to look for new business opportunities abroad, though the VMNO model has been notoriously difficult and only a few companies have really succeeded in the space, such as Britain’s own Virgin Group. That said, I would give this initiative only a 20-30 percent chance for success, but would expect to see China Telecom trying more similar innovative overseas initiatives in the next 2 years.

Bottom line: New products from China Unicom and China Mobile could breath new life into their 3G business this year, while an overseas move by China Telecom is likely to fail.

Related postings 相关文章:

◙ China Telecoms Faces Power Struggle, Half-Baked 4G 中国电信行业遭遇政府监管权利斗争

◙ Unicom, China Telecom in iPhone 4S 中国电信有望领先推出iPhone 4S Race

◙ China Mobile 3G: Where Are the Subscribers? 中国移动3G：订户在哪里？

PetroChina Explores Insurance 中石油试水保险业

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Much of the world is watching China’s hunt for global resource M&A, which looks set to accelerate in 2012, but a completely different piece of news caught my eye this morning from leading oil producer PetroChina (HKEx: 857; Shanghai: 601857; NYSE: PTR), which has just announced a new venture in the completely unrelated insurance sector. (company announcement) PetroChina made headlines earlier this week with the announcement that it was buying out its partner in a Canadian oil sands project, the latest in a recent string of global acquisitions for the company and its rivals as China looks to feed its hungry economy and make itself more energy self-sufficient. (English article) But the insurance announcement seems to have gone relatively unnoticed by many major media, even though it looks rather large to me with registered capital of nearly $1 billion. Perhaps people are unimpressed by the fact that PetroChina’s partner in the venture is its state-run parent, which will hold a controlling 51 percent stake, meaning this is really just a nominal joint venture since both partners are part of the same company. It’s also a bit disappointing to see that while the venture will sell insurance in many popular areas, such as health and property, one area that’s not on the list is the most lucrative life insurance sector, meaning industry leaders China Life (HKEx: 2628; Shanghai: 601628; NYSE: LFC), Ping An (HKEx: 2318; Shanghai: 601318) and New China Life (HKEx: 1336) may not need to worry about new competition anytime soon. While this move looks a bit strange on the surface, I find it quite intriguing and perhaps even intelligent as PetroChina looks for ways to diversify beyond its core oil exploration business, which is famously subject to huge price swings globally and strict price controls at home by Beijing. I suspect that formation of this joint venture is just the first step, and that we may soon see PetroChina try to bring in a more experienced partner from the financial services sector to help it run the venture by the end of this year. If it does take that route, the right combination of PetroChina’s deep pockets and a savvy financial services partner could make this new endeavor a serious competitor in the insurance space in the next 2-3 years.

Bottom line: PetroChina’s move into insurance looks like a smart diversification play if the company can find a good partner from the financial services sector to develop the business.

Related postings 相关文章:

◙ Ping An Returns to Market With Second Big Fund Request 中国平安拟发大规模可转债

◙ 2012: The Year of China Resource M&A? 2012：中国企业的资源并购年？

◙ AIG’s Greenberg Returns to China With Dazhong Tie-Up AIG前执行长格林伯格借投资大众保险重返中国

China Banks: More Trouble Signs

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Just a week after a leading Chinese newspaper predicted a new wave of capital raising by China’s banks this year, the latest trouble sign is emerging for the overstretched sector with news that Beijing will delay implementing tougher new capital requirements. The China Daily is citing a Bank of China (HKEx: 3988; Shanghai: 601398) official saying the banking regulator will postpone tougher new requirements, which were supposed to take effect on January 1, to the second half of the year instead. The news comes as signs mount that balance sheets at China’s banks are coming under growing pressure as the real estate market shows early signs of a major correction and the stock market fell 20 percent in 2011, both of which point to a big rise in souring loans this year. Last week, ICBC (HKEx: 1398; Shanghai: 601398) launched a nearly $8 billion subordinated bond offering to raise its capital adequacy ratio in anticipation of the new requirement, looking to the debt market to boost its capital. (English article) That came after the China Securities Journal wrote last week that many lenders, including Agricultural Bank of China (HKEx: 1288; Shanghai: 601288), one of China’s top 4 state lenders, and Bank of Communications (HKEx: 3328; Shanghai: 601328), a top regional lender, will need to replenish their capital this year, following a lending binge in 2009 and 2010 under orders from Beijing to boost the economy during the global downturn. (previous post) This new recapitalization will come only 2 years after a similar exercise that saw banks raise more than $100 billion collectively, again prompted by their overzealous lending during the global downturn. China Merchants Bank (HKEx: 3968; Shanghai: 600036), another major regional lender, kicked off the drive in the middle of last year with a plan to raise $5.4 billion. The contagion this time has shown signs of spreading to the insurance sector, with Ping An (HKEx: 2318; Shanghai: 601318), China’s second largest insurer, also announcing a plan in December to raise more than $4 billion. No matter how you look at it, 2012 will be a challenging year for Chinese banks and perhaps even tougher for their investors.

Bottom line: The delay of new tougher capital requirements is the latest sign of trouble among China’s banks, which will soon launch a major new capital raising drive.

Related postings 相关文章:

◙ 2012: Capital Raising II Year For China Banks

◙ Ping An Returns to Market With Second Big Fund Request 中国平安拟发大规模可转债

◙ Message to Beijing: Privatize the Big 4 Banks 对中国政府说：将四大银行退市吧

News Digest: January 5, 2012

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The following press releases and media reports about Chinese companies were carried on January 5. To view a full article or story, click on the link next to the headline.

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◙ China Telecom (HKEx: 728) May Expand to France, Germany Following U.K. (English article)

◙ Apple (Nasdaq: AAPL) iPhone 4S Arrives in China on January 13 (Businesswire)

◙ PetroChina (HKEx: 857) Announces Formation of Insurance Joint Venture (HK Stock Exchange)

◙ Spreadtrum (Nasdaq: SPRD) Makes 1GHz Low-Cost Platforms for TD-SCDMA & EDGE/WiFi (PRNewswire)

◙ Nokia (Helsinki: NOK1V) Says to Move Asia-Pacific President to Beijing From Singapore (Chinese article)

LDK’s German Buy: Two Losers Combine 赛维LDK收购Sunways将使前者境况雪上加霜

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LDK Solar (NYSE: LDK), the weakest of China’s struggling solar panel makers, is starting off the new year with plans to buy another battered German competitor, a move that looks OK in theory for this sector in need of consolidation but one that will ultimately bring LDK even more headaches than it already has. LDK has offered to buy Sunways AG (Frankfurt: SWW) for 24 million euros, according to a media report, a relatively modest sum for a company of LDK’s scale. (English article) (company announcement) The rationale for this deal is relatively straightforward: Sunways will offer LDK new technology to boost the efficiency of its solar cells, making its products more competitive. The German company will also offer LDK manufacturing facilities outside its home China base, an important diversification move as both the US and Europe consider levying anti-dumping tariffs against solar cells manufactured in China. The main problem is that Sunways is losing money, and is unlikely to see its position improve anytime soon as the industry suffers through its worst-ever downturn. LDK, meantime, is hardly in a position to provide the German company with much financial help, having itself sunk deeply into the red last year as it struggles under a heavy debt load. Asian companies have traditionally had a difficult time with European acquisitions, as labor laws in those countries tend to be very tough and unions also provide a big challenge to inexperienced Asian firms. I see lots of conflict ahead for LDK ahead if this merger proceeds, making the company’s already troubled situation even worse and setting the stage for a difficult year in 2012.

Bottom line: LDK’s planned purchase of a German solar panel maker will create more problems for the already shaky company.

Related postings 相关文章:

◙ Solar Matures With Foxconn Entry

◙ Beijing Boosts Solar In Latest Mixed Signal　中国扩张太阳能行业发展 解决与美争端立场混乱

◙ China Rescues LDK With New Financing 中国拯救赛维LDK举动与未提供不公补贴说法相左