Bottom line: Qihoo’s privatization is likely to succeed after shareholder approval of its buyout offer, though many similar pending deals could collapse and might consider strategic stake sales like the new one by LightInTheBox.
Shareholders approve Qihoo buyout
The volume of noise coming from Chinese companies privatizing from New York has dropped sharply in the last month, reflecting volatility in their home market where many hope to one day re-list. But 2 major new stories from that wave are back in the headlines, led by shareholder approval for what would be the biggest privatization so far for security software specialist Qihoo 360 (NYSE: QIHU).
At the same time, the much smaller e-commerce firm LightInTheBox (NYSE: LITB) has just closed another deal that looks less radical than an outright privatization and could provide an alternative template for companies seeking to attract more investor attention. That deal has the company selling 30 percent of itself to Hong Kong-listed Zall Development (HKEx: 2098), which paid a large premium for the stake. Read Full Post…
The following press releases and news reports about China companies were carried on April 1. To view a full article or story, click on the link next to the headline.
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Bottom line: Weak debuts for 2 China bank IPOs in Hong Kong and anemic profit growth for ICBC and Bank of China reflect the industry’s building bad loan problem, which could erupt into a full-blown crisis by the end of this year.
The headlines are littered with negative stories about Chinese banks as we reach the climax of the latest earnings season, reflecting the dismal outlook for this group of lenders staring at a major bad loan crisis. Often I like to be contrarian in this kind of situation and say it could represent a good buying opportunity, since Chinese bank stocks now trade at very low price to earnings (PE) multiples. But in this case I really do think far worse is still to come before the building crisis subsides, meaning there’s still plenty of downside for these stocks.
The bleak outlook was reflected by new Hong Kong IPOs for 2 local commercial lenders, whose shares both priced near the bottom of their range and ended flat on their first trading day. At the same time, 2 of China’s top 4 banks, ICBC (HKEx; 1398; Shanghai: 601398) and Bank of China (HKEx: 3988; Shanghai: 601398), both posted their latest quarterly results that continued to show their profits were sapped by growing bad debt. Read Full Post…
In a move that is likely to alleviate its strained relationship with Beijing and give new impetus to big data in one of China’s poorer regions, Qualcomm (Nasdaq: QCOM) has signed a strategic cooperation agreement with the provincial government of Guizhou.
Signed on January 17, the agreement will see Qualcomm establishing a Guizhou-based investment corporation to look for more business opportunities in China’s integrated circuit market, and promote the development of the country’s related industries.
The deal, which also creates a joint venture named Guizhou Huaxintong SemiconductorTechnology, is a major step in Guizhou’s effort to position itself as a leader in the big data field in China. The province has been designated by the central government as a pilot zone for the development of big data, and has a sound regulatory framework and a sophisticated infrastructure that is of growing interest to foreign tech firms. Read Full Post…
Bottom line: Disney will face huge challenges in running a smooth opening for its new Shanghai park in June, as it faces potential negative publicity from aggressive ticket scalpers and other glitches associated with such a big event.
Tickets sell out for Shanghai Disney opening day
The official countdown has begun to the June opening of Shanghai Disneyland, in a story that contains both scripted and unscripted moments reflecting what a commotion this event is likely to become. In the scripted category, luminaries including basketball legend Yao Ming and piano superstar Lang Lang attended an event this week kicking off the 80 day countdown to the big opening. In the unscripted column, opening day tickets to the park sold out quickly after going on sale, and were showing up later in the day from scalpers who were asking for twice the price or more.
I was living in Hong Kong just before Disney opened its last theme park there back in 2005. I don’t recall nearly this level of hype before that opening, and certainly not the big issue with scalpers that are an endemic part of the Chinese landscape. But I do recall the numerous glitches that occurred in the months after the Hong Kong park opened, and how media feasted on the negative developments that are almost inevitable when launching a project of such magnitude. Read Full Post…
The following press releases and news reports about China companies were carried on March 31. To view a full article or story, click on the link next to the headline.
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Zheshang, Tianjin Banks Underwhelm in Hong Kong Debut (English article)
Midea (Shenzhen: 000333) Pays 53.7 Bln Yen for 80.1 Pct of Toshiba’s Appliance Unit (Chinese article)
ICBC (HKEx: 1398) Reports Annual Results for 2015 (HKEx announcement)
Bottom line: Marriott stands a 60-40 chance of having its bid for Starwood approved at an April 8 shareholder vote, since a competing Anbang proposal could face the strong possibility of rejection by China’s insurance regulator.
Anbang confident of Beijing will approve Starwood bid
A series of new reports and data on Chinese insurer Anbang are showing why the company is confident it can get regulatory approval from Beijing in its heated bidding war for Starwood (NYSE: HOT), operator of the Sheraton and Westin hotel brands. I also expect that the US regulator would have little or no reason to veto such a deal on national security grounds, since Starwood really doesn’t handle any sensitive information as hotel operator.
Thus from a regulatory perspective, if the latest Chinese reports are correct, it does look like Anbang would be able to get the necessary regulatory approval from both Washington and Beijing to buy Starwood for $14 billion in its ongoing bidding war with Marriott (NYSE: MAR). But the reports coming from China are quite contradictory, reflecting a potential looming clash between Anbang and China’s conservative insurance regulator. Read Full Post…
Bottom line: Fresh food sellers Yiguo and FruitDay could see strong growth and go public in the next 2-3 years, banking on strong partnerships with Alibaba and JD.com and growing consumer willingness to buy groceries online.
Yiguo in big new funding
Fresh fruit and other grocery items are the latest hot ticket in China e-commerce, with 2 up-and-coming players receiving big new fundings of $100 million or more. The larger of the pair has e-commerce leader Alibaba (NYSE: BABA) and global private equity giant KKR helping online fresh food seller Yiguo raise about $260 million in new money. The other has an online fruit specialist called FruitDay, whose backers include Alibaba arch-rival JD.com (Nasdaq: JD), raising its own $100 million.
This particular trend is really a sub-trend of a broader movement by China’s e-commerce giants into the grocery business over the last few years, encroaching on traditional supermarkets and also Wal-Mart’s (NYSE: WMT) Yihaodian that found early success in the space. Even Amazon (Nasdaq: AMZN) China has gotten into the business, though many of these companies specialize in more traditional packaged foods rather than fresh products. Read Full Post…
Bottom line: Xiaomi’s new Mi Ecosystem of smart appliances and devices outside its core smartphones are unlikely to gain much traction due to its limited resources and mediocre product designs.
Xiaomi rolls out high-tech rice cooker
Smartphone maker Xiaomi, a former headline grabber whose star has faded over the last year, is steaming back into the news this week with its launch of a new sub-brand that’s part of its attempts to build an ecosystem of interconnected products and services. The new sub-brand, called Mi Ecosystem, looks interesting conceptually and appears to be targeting more ordinary home appliances like rice cookers, which is the first official product carrying the new name.
The only problem is that this kind of ecosystem play has become a buzzword not just in China, but also throughout the world. Everyone is trying to figure out how to make smart devices that can talk to their owners and with each other to run homes more efficiently. Apple (Nasdaq: AAPL) was one of the earliest companies in the space, and in China nearly all of the big Internet companies now have partnerships with appliance and device makers in a bid to develop similar smart products. Read Full Post…
Bottom line: Beijing should launch an aggressive campaign to privatize state-owned enterprises, which could cause some short-term pain but will ultimately put the economy on a more stable long-term footing.
Profits tumble at SOEs
The latest profit reports for big state-owned enterprises (SOEs) are coming in for the first 2 months of the year, and the picture isn’t pretty and even looks quite worrisome for China’s thousands of state-owned enterprises (SOEs). New data published late last week showed profits for SOEs tumbled 14.2 percent in January and February combined, as they continued to be plagued by problems like overcapacity and weak demand due to China’s slowing economy.
But one of the biggest problems facing these companies, and one that threatens their long-term survival, is their failure to act commercially, a legacy of China’s planned economy that saw big SOEs historically function as tools for executing government policy. Such a tendency is what, for example, drives steel makers to continue producing at full throttle even when every ton of product they sell adds to losses due to the sector’s huge overcapacity. Read Full Post…
The following press releases and news reports about China companies were carried on March 30. To view a full article or story, click on the link next to the headline.
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Anbang Wouldn’t Cross 15 Pct Offshore Investment Cap with Starwood Buy – Source (Chinese article)
Online Fresh Food Retailer Yiguo Gets $240-$280 Series C Funding from Alibaba, KKR (Chinese article)
China Said to Consider Cutting Subsidies for Electric Vehicles (English article)
