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Oops: Beijing thows oil majors a meager bone

By newsdoug on February 20, 2011

Well, I have to admit my poor timing in predicting that Beijing was more worried about inflation than giving the oil majors a price hike they desperately wanted. Just a day after I made my pronouncement, Beijing went ahead and raised gas prices, though only by a meager 0.26 to 0.30 yuan per litre. Clearly soaring oil prices in response to all the turbulence in the Middle East have captured Beijing’s attention. This appears to be a nod to that, though these kinds of price hikes will hardly offset the big jumps in oil prices we’ve seen of late. I’m guessing oil majors like Sinopec (HKEx: 386; NYSE: SNP) and PetroChina (HKEx: 856; NYSE: PTR) will continue to bitch and moan, and try other less obvious tactics to get the higher prices they want. But in the end, Beijing is still likely to be more focused on inflation, and only toss them periodic symbolic price hike bones like this one.

Real Estate Rising?

By newsdoug on February 19, 2011

The January numbers are out, and it looks like China’s real estate rumble continues. Analysis from most of the country’s regions shows that prices continued to rise in the vast majority of markets for the month as Chinese continued to plunk down their life savings, and the savings of family, friends and their local neighborhood banks, on the belief that things can only go up. Of course everyone knows that what goes up must eventually come down, especially when price hikes get out of whack with market reality. The question is when, and if that when is anytime soon. What the numbers I looked at failed to show is sales volume, which I suspect is down sharply. I have spent the last few days viewing Shanghai apartments, and the agent tells me that sales here have come to a virtual standstill as everyone waits to see what effect the government’s latest cooling measures will have. New taxes on properties sold for quick profits also have people worried. Is a crash imminent? I’d say the boom still probably has another quarter or two left to it, but beyond that you might want to hold off on betting on that new ranch home you may have been eying. Property builders beware…

SMIC: Forging a Better Future?

By newsdoug on February 19, 2011

SMIC… What can you say about this company, which launched with such fanfare a decade ago and then went on to flounder for much of its short life before white knight David Wang came in to turn it around? The turnaround story has reached an important milestone, with SMIC posting its third consecutive quarterly profit and first profitable year in quite some time. But let’s not forget the entire industry has been riding high these days, and Wang has warned on several occasions that SMIC’s own fortunes could slumpl if the notoriously cyclical sector falls back on slow times, which is inevitable. First quarter guidance hardly looked encouraging, with margins and revenue both forecast to slip. And yet Wang said he wants to boost revenue for the year by 20 percent. Something is out of whack here, though I suspect the company is growing conservative in case things start to head south, which isn’t at all clear yet. Given the company’s decent track record in Wang’s first year in office, I’d say it’s too early to write off SMIC’s comeback, and these guys deserve a chance to show they’ve got what it takes to compete with the big boys.

Sorry, Sinopec. Beijing’s more concerned wtih inflation, social stability

By newsdoug on February 18, 2011

Recent reports that Sinopec (HKEx: 386; NYSE: SNP) got its employees to make Internet postings in support of fuel price hikes should come as no surprise to anyone, as the company tries desperately to boost its margins and profits by hook or by crook. Market-set fuel prices may be the ultimate goal for everyone involved, but given China’s rampant inflation at the moment I’d be surprised to see any major fuel price hikes anytime soon. The only thing that scares China more than losing money is social instability, which is exactly what Beijing fears if inflation gets too out of hand. Heaven forbid all those consumers who dropped thousands of dollars on new cars over the last couple of year should suddenly find themselves unable to drive them due to high fuel costs!

Lenovo — Back in the Hunt?

By newsdoug on February 18, 2011

After years of struggling following its misguided purchase of IBM’s PC business, Lenovo (HKEx: 992) seems to be finally back in the global PC hunt, at least based on its latest results ( Lenovo results ). But is the company that still dominates its home China market really ready for the big leagues just yet? The numbers seem to say yes: in its latest results, it boosted its already dominant market share at home, made huge gains in emerging markets and did all that while keeping margins respectable. But I’m still not convinced this company is ready for prime time. Its NEC joint venture shows signs of its wannabe status, and bears eerie resemblance to its foolish IBM purchase. Its mobile venture seems to lack focus, and bears more of a me-too mark as well, much like its netbook strategy of a few years back. In short, this company still lacks focus in my view, relies way too much on its home China market, and is too much of a me-too company in its product development strategy. Let’s see how the numbers grow, but my guess is that the boom times won’t last too much longer.

ZTE Runs Out of Wind in Bid for Sprint Contract — Uh, did anyone NOT see this coming?

By newsdoug on February 17, 2011

I have to say that anyone who didn’t see this coming must have been asleep at the trading table, as signs from Sprint (NYSE: S) had been pretty strong that ZTE (HKEX: 763) wasn’t going to get any business in helping to build Sprint’s 4G network. You’ve got to give credit to ZTE for trying, even when the odds were very stacked against it. Truth be told, it’s probably just a matter of time before ZTE scores its first big networking equipment contract in the US. China has already shown that it’s willing to go to bat for its network equipment makers in India, and, while it hardly has the same leverage with the US government, there’s every indication that it wants its star companies like ZTE to prove they’ve really arrived on the global stage with some major US sales. Security concerns will continue to be an issue for American politicians, but now that the mid-term elections are over and the next big election is nearly two years off, I wouldn’t be surprised to see ZTE or maybe even Huawei sneak in their first major US deal sometime in the next 12 months.