Bottom line: ZTE will lose its appeal of tough US export sanctions for illegally selling high-tech equipment to Iran, as Washington sends a strong signal that companies engaging in such actions will face stiff punishment.
ZTE to appeal US sanctions
An increasingly frantic ZTE (HKEx: 763; Shenzhen: 000063) is working on several fronts in a bid to stop crippling US sanctions, after Washington determined the company illegally sold equipment to Iran. I used to be a strong supporter of compromise in China’s frequent trade conflicts with the west, and still believe that some form of compromise might be the best solution here.
But at the same time, the frequent tendency by Chinese companies to flout laws and agreements both at home and abroad shows that sometimes harsher measures are the only way to convince these firms to play by the rules. Accordingly, I do expect we could see Washington take a relatively tough stance against ZTE in this case, despite protests from Beijing and the potential for big disruption to the operations of one of China’s largest telecoms equipment makers. Read Full Post…
Bottom line: Huayi has the potential to become one of China’s leading makers of Hollywood-style film and video, with a strong track record that has helped to attract major partners for a growing string of well-conceived production deals.
Huayi destined for China stardom?
Two savvy new deals this week are casting a spotlight on fast-rising rising film star Huayi Bros (Shenzhen: 300027), which is fast emerging as China’s most promising independent film-maker that could someday attain Hollywood-level status. Huayi is the lone company in my “favorite Chinese stock” series from China’s Nasdaq-style ChiNext board, which is typically quite volatile and often looks more like a casino than a serious stock exchange.
But despite any volatility in its share price, Huayi has shown an ability to consistently make movies and other entertainment products that get strong audience reception, laying the foundation for strong future growth. The company has become a regular fixture in the headlines, including the 2 new production deals this week that both look quite promising. Read Full Post…
The following press releases and news reports about China companies were carried on March 17. To view a full article or story, click on the link next to the headline.
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ZTE (HKEx: 763) Said to Appeal US Export Ban After Lobby Efforts Fail (English article)
Ctrip (Nasdaq: CTRP) Reports Q4 and Full Year Results (PRNewswire)
BAIC, BYD, Dongfeng Motor to Use LeEco (Shenzhen: 300104) Car Internet System (Chinese article)
Terra Firma Rejects HNA Bids for Jet Leasing Group AWAS – Sources (English article)
ReneSola (NYSE: SOL) Announces Convertible Note and Share Repurchases (PRNewswire)
Bottom line: Midea’s reported bid for Toshiba’s home appliance business reflects a renewed global push by Chinese white goods maker, but is likely to fail due to Midea’s lack of experience managing a global brand.
Midea eyeing Toshiba’s white goods?
Leading appliance maker Haier (HKEx: 1169) could quickly discover it’s not the only Chinese company roaming the globe for acquisitions, with word that domestic rival Midea (Shenzhen: 000333) is in talks to buy the white goods business of Japan’s Toshiba (Tokyo: Tokyo). This particular news comes as Haier finalizes its purchase of the home appliance unit of General Electric (NYSE: GE), and is part of a larger push by big western companies to sell their lower-margin white goods businesses.
A subset of that bigger story has seen Japanese brands engage in their own campaign to sell off assets from their lower margin businesses, many of which are losing money. That trend has culminated in prolonged talks that are likely to see the struggling Sharp Corp (Tokyo: 6753) sell itself to Taiwan’s Hon Hai (Taipei: 2317), in what would mark the largest-ever sale of a Japanese electronics company to a foreign buyer. Read Full Post…
Bottom line: Ele.me is unlikely to face long-term fall-out from an attack on CCTV’s annual Consumer Rights Day show, but will still be challenged by a business model that forces it to work with thousands of small, often problematic restaurants.
Ele.me attacked on CCTV Consumer Rights Day show
Online take-out dining pioneer Ele.me is taking a double-hit this week, led by an attack on the company for working with improper licensed restaurant partners during a high-profile TV show broadcast each year on Consumer Rights Day. At the same time, the company is reportedly suffering as droves of those same restaurant partners shun its B2B service due to high fees and slow delivery times.
Both of these stories reflect just how rapidly Ele.me has risen over the last year, and also the usual cut-throat competition that has sprung up in China’s online-to-offline (O2O) take-out dining sector. Ele.me was the earliest major arrival to that space, where online companies offer take-out delivery service for diners from a wide range of local and chain restaurants. Read Full Post…
Bottom line: Alibaba will come close to meeting the top end of its target of raising $3-$4 billion with a new bank loan, and chances are as much as 50-50 that it will use the funds to make bids for Groupon or the stake of itself held by Yahoo.
Alibaba turns to banks for new mega-loan
After first splashing into the headlines with rumors 2 weeks ago, e-commerce giant Alibaba (NYSE: BABA) has finally announced its latest cash-raising exercise in the form of a syndicated loan worth at least $3 billion. Following that official confirmation, all eyes will now be looking to see if Alibaba can find more demand to boost the loan amount even higher, and for any indication of what exactly it has planned for the new funds.
Let’s begin by looking at the latest reports, which have Alibaba announcing the loan in a regulatory filing. It’s somewhat noteworthy that the high-profile Alibaba hasn’t issued a formal press release about the loan, perhaps because it’s waiting to see where the final amount will top out. But perhaps Alibaba has also finally realized it’s better not to raise expectations too high with a hype-filled announcement, which can ultimately backfire if interest from smaller banks in joining the new lending syndicate is poor. Read Full Post…
The following press releases and news reports about China companies were carried on March 16. To view a full article or story, click on the link next to the headline.
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Zoomlion (HKEx: 1157) Sweetens Offer for US Crane Maker Terex (NYSE: TEX): Sources (English article)
Anbang wins US Security Panel OK to Buy Fidelity & Guaranty (English article)
Midea (Shenzhen:000333) to Buy Toshiba (Tokyo: 6502) White Goods Unit – Source (Chinese article)
China’s Consumer Rights Show Trains Sights on Local Food-Delivery Site Ele.me (English article)
JD.Com (Nasdaq: JD) Gains on Alibaba as Spending Jumps, Profit Estimates Drop (English article)
Bottom line: Starwood will ultimately reject a rival bid for itself by Chinese insurer Anbang, though earlier suitor Marriott may have to raise its original offer in order to close a deal.
Anbang makes counter bid for Starwood
China is shaping up as spoiler in the biggest US hotel merger of all time, with word that Chinese insurance company Anbang has made a surprise counter bid for Starwood (NYSE: HOT), operator of the Sheraton and Westin brands. The bid comes as the struggling Starwood was preparing to sell itself to larger and better-run US rival Marriott (NYSE: MAR), whose original offer is about 5 percent lower than Anbang’s. The latest twist also comes just a day after media reported that Anbang was in talks for another blockbuster deal to buy Strategic Hotels & Resorts, owner of a portfolio of US luxury hotels, in a deal valued at $6.5 billion.
I previously said that Anbang appears to be a company with too much cash, and would add that it doesn’t seem to have a very strong understanding of the hotel business. Put simply, Anbang seems to be suddenly smitten with any asset containing the word “hotel”, since Strategic and Starwood are very different types of companies. Whereas Strategic is largely a property owner, Starwood earns most of its money from managing hotels under its brands in buildings owned by other companies. Read Full Post…
Bottom line: China Southern’s removal of its air tickets from Qunar represents the latest boycott by a major supplier, and will further deprive Qunar of a key revenue source, causing its losses to further widen.
China Southern dumps Qunar
The bumpy ride for China’s online travel services sector continues this week, with word that leading airline China Southern (HKEx: 1055; Shanghai: 600029) is withdrawing all of its tickets from Qunar (Nasdaq: QUNR) due to a high volume of customer complaints. China Southern is just the latest airline to make such a move on Qunar’s site, following in the path of rivals Air China (HKEx: 753; Shanghai: 601111) and Hainan Airlines (Shanghai: 600221).
This particular series of boycotts marks the latest flare-up in an increasingly tense relationship between online travel sites and the airlines and hotels that are their biggest suppliers. Just last month China Southern reportedly decided to withhold its cheapest tickets from all travel agents. And major hotel operators last year formed a group to counter the increasing clout of Qunar and Ctrip(Nasdaq: CTRP), the industry’s top 2 players that are now allies after forming a major equity tie-up last year. Read Full Post…
Bottom line: China’s anti-trust regulators need to wake up to the growing clout of big nmes like Tencent and Ctrip in emerging industries and move more aggressively to stop them from engaging in anti-competitive behavior.
iKang accuses rival of monopoly behavior
A war of words broke out last week between two of China’s largest private clinic operators, as one accused the other of violating the nation’s anti-monopoly laws with a recent purchase. The case pitting iKang (Nasdaq: KANG) against larger rival Health 100 (Shenzhen: 002044) casts a spotlight on growing concerns about anti-competitive behavior in China’s vibrant private sector, which boasts many companies whose size is already approaching some of the nation’s largest state-run giants.
And yet despite the size of these companies and increasing cases of anti-competitive behavior, China’s anti-monopoly regulators have largely ignored the domestic private sector, focusing instead on big foreign and state-run firms. The validity of iKang’s accusations against Health 100 still need to be proven, since China’s private clinic sector is still very young and may not have the scale to qualify for monopoly consideration. Read Full Post…
The following press releases and news reports about China companies were carried on March 15. To view a full article or story, click on the link next to the headline.
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