Bottom line: Qiyi’s new tie-up with Universal Music could presage its purchase of Baidu’s music unit, while Qihoo’s new video campaign is likely to stumble due to intense competition from existing players.
Qiyi ties with Universal Music
A couple of new reports are casting a spotlight on the rapid colonization of the video and music spaces by new media companies. The most intriguing of those has Qiyi.com, the online video site affiliated with search leader Baidu (Nasdaq: BIDU), taking a major step into the music space through a tie-up with global entertainment giant Universal Music. The second has the aggressive Qihoo 360 (NYSE: QIHU) making a late but big push into the online video space via a major new hire.
Both of these stories reflect the big challenge that private companies are now posing to traditional TV and radio stations, as they rapidly challenge a state-owned establishment that held a monopoly on China’s entertainment sector for decades. The resulting boom in video and music services has been great for consumers. But in usual Chinese fashion the explosion has sparked another cycle of hyper-competition that has pushed everyone deeply into the red, and is almost certain to end with the typical bust in a few years. Read Full Post…
Bottom line: Hard Rock’s new plan for China resorts and restaurants will do well due to its focus on young, wealthy hipsters, and could also auger a broader move by second-tier global hotel brands into the market.
Hard Rock coming to China
China’s hotel sector has just crossed a sort of milestone, with word that Hard Rock, a well-known but decidedly second-tier western brand, is dipping its toe into the market. Hard Rock’s move comes more than a decade after most of the world’s top hotel operators entered China, and roughly coincides with a recent push by global names like Marriott (NYSE: MAR) and Accor (Paris: AC) into the middle- and lower ends of the market.
Hard Rock has announced plans to build 3 hotel resorts in the cities of Dalian, Shenzhen and Haikou, and additional plans to open Hard Rock restaurants that are more familiar to many consumers. (English article) Such a plan looks a bit late, but could actually be well-timed since most of these resorts won’t be complete for a few years after the market has absorbed a recent glut in new property building. Read Full Post…
Bottom line: Qunar’s new airline investment is unlikely to offset its shrinking access to tickets from major airlines, while Ctrip’s new purchase of a strategic stake in Uzai.com extends its strategy to eliminate competitors through such tie-ups.
Ctrip invests in Uzai.com
China’s rapidly consolidating travel services sector is taking an interesting new twist onto the runway, with word that number-two website Qunar (Nasdaq: QUNR) is joining a group launching a new airline. At the same time, separate media reports are saying that industry industry leader Ctrip(Nasdaq: CTRP) has just neutered another rival using its recent approach of buying a strategic stake in the company.
Both of these stories point to the growing clout of Ctrip and Qunar, which were once bitter rivals but became a de facto single company last year after a landmark equity tie-up. I have long called for consolidation in China’s highly fragmented travel services sector, but now sense that Ctrip is looking increasingly like a monopoly after its recent buying spree that has seen it buy up strategic stakes in most of its major rivals. Read Full Post…
The following press releases and news reports about Chinese companies were carried on March 2. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════
Qiyi.com, Universal Music Team Up in Paid Music Service (Chinese article)
JD.com (Nasdaq: JD) Announces Q4 and Full Year 2015 Results (GlobeNewswire)
Qunar (Nasdaq: QUNR) Taking Part in Application for New Airline in Shenzhen (Chinese article)
Hard Rock Expands in China to Tap Growing Leisure Industry (English article)
China Resources Said Near SAB (London: SAB) JV Buyout for About $2 Bln (English article)
Bottom line: Turmoil in the Republican Party could claim a growing number of proposed Chinese acquisitions of US firms as victims, as Republican candidates turn to China bashing to curry voter favor before November elections.
Opposition grows over Terex sale to Zoomlion
Election year politics could soon claim their latest victim in M&A between the US and China, with 2 more congressmen expressing their concerns about Chinese construction equipment giant Zoomlion’s (HKEx: 1157; Shenzhen: 000157) talks to purchase US crane maker Terex (NYSE: TEX). This development doesn’t surprise me very much, especially since the latest 2 lawmakers to joint the anti-China movement are both Republicans seeking to curry favor with voters on this relatively simple issue as their own party sinks into chaos.
I don’t usually write in much detail about US politics, since the intricacies of elections aren’t that relevant to China trade. But in this particular election, growing chaos within the Republican Party could soon create anti-China rhetoric that’s louder than usual. That’s because many Americans could quickly become frustrated with the Republican Party’s infighting, which could hurt its candidates’ election prospects. That could leading many Republican candidates to try to win voter favor by rallying around the relatively safe concern about China’s growing global influence. Read Full Post…
Bottom line: Foreign investors will give China bank IPOs a cold shoulder for the rest of this year due to concerns of a bad debt crisis, potentially driving valuations even lower than their already depressed levels.
Zheshang Bank delays IPO plan
A couple of banking stories are spotlighting the rapidly fading attraction of Chinese lenders to foreign investors, who fear the banks are standing on the cusp of a bad loan crisis fueled by China’s cooling economy. The first item has Citigroup (NYSE: C) selling its 20 percent stake in China Guangfa Bank for $3 billion, after original plans to list the bank collapsed due to lack of investor interest. The second item has China Zheshang Bank also delaying plans for a $1 billion Hong Kong IPO for similar reasons.
Both developments come as Chinese banks listed in Hong Kong now trade at extremely low multiples due to concerns about their individual health and China’s broader economic slowdown. Leading lender ICBC (HKEx: 1398; Shanghai: 601398) now trades at a paltry price-to-earnings (PE) multiple of just 5, while Bank of China (HKEx: 3988; Shanghai: 601398) trades at an even lower 3.8. Read Full Post…
This week’s Street View takes us back to my other adopted hometown of Los Angles, where a case of extreme bullying is shining a spotlight on what sometimes happens to the growing number of Chinese kids who get shipped abroad by their parents to study in US high schools. Back when I first came to China in the 1980s, only the hardest working and brightest young people could go to study abroad, almost always on full scholarships that they applied for and received by themselves for graduate studies.
The difficulty of that early process weeded out all but the brightest and most motivated students, who were usually in their early 20s or older and savvy enough to take care of themselves in a strange and unfamiliar environment. Fast forward to the present, when a new generation of young kids from big cities like Shanghai are being sent abroad to study in US high schools with little or no adult supervision and even less experience of living on their own. Read Full Post…
The following press releases and news reports about Chinese companies were carried on March 1. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════
US Lawmakers Urge Caution on Potential Chinese Deal to Buy US Crane Maker (English article)
Citi (NYSE: C) to Sell Stake in China Guangfa Bank (Businesswire)
SAPPRFT to Strengthen Supervision of Online Video Series (English article)
Gree (Shenzhen: 000651) Products to Return to Suning (Shenzhen: 002024) Stores (Chinese article)
Alibaba (NYSE: BABA) Joined by Ma, Tsai for $500 Mln Stock Purchase (English article)
Bottom line: Wanda Group’s newly announced 3 billion euro Paris theme park is the latest in a string of its massive new investments, many of which are likely to collapse or get sharply scaled back due to lack of resources.
Chinese billionaire Wang Jianlin to builld Paris theme park
Billionaire real estate tycoon Wang Jianlin is growing fond of the “b” word these days, with yet another announcement of a multibillion-dollar investment. This time the Wanda Group chief is announcing plans for a $3.3 billion theme park in Paris that would rival the existing nearby resort owned by Disney (NYSE: DIS), which just happens to be revving up to launch its own first theme park on Wanda’s home turf in China.
If I sound just a little skeptical, it’s because I’m growing increasingly suspicious that Wang has become addicted to making big announcements that may never get completed. This particular deal comes less than 2 months after Wang said he would buy Hollywood film studio Legendary Entertainment for $3.5 billion. (previous post) Many are also guessing that Wang may bid aggressively for a strategic stake worth $1 billion or more in Hollywood major Paramount Pictures, which announced just last week it is looking for such a partner. (previous post) Read Full Post…
Bottom line: Apple would probably hand over iPhone user information to Beijing if faced with a situation like its current standoff with Washington, but would keep the matter low profile and possibly try to find other ways to placate Beijing.
Washington standoff spotlights Apple’s cooperation with Beijing
As the high-profile standoff between Apple (Nasdaq: AAPL) and Washington continues over access to information on a terrorist’s iPhone, a new report is raising the interesting question of what the US tech giant might do if faced with a similar situation in China. Actually, the “what if” scenario isn’t raised too much in the Los Angeles Times report, which instead focuses more on the cozier relationship that Apple has with Beijing in terms of allowing access to sensitive information related to its products.
But this still looks like a good opportunity to explore the “what if” angle, since Apple might find far fewer friends in China if it decided to defy a Beijing order to hand over information stored on the Chinese iPhone of a known terrorist. By comparison, the US technology giant has found at least some supporters for its refusal to help the FBI access information stored on the iPhone of Syed Rizwan Farook, the man behind the worst terrorist attack in the US since September 11. Read Full Post…
China’s growing love affair with Hollywood is reaching new peaks, with word that major studio Paramount Pictures may be preparing to sell a stake of itself to a Chinese buyer. Such a deal would be the highest profile investment yet in an ever-growing string of Chinese tie-ups with Tinseltown over the last 2 years. In some ways the movement looks strangely similar to Japan’s invasion of Hollywood more than 25 years ago, which saw Universal and Columbia Pictures sold to Japanese buyers.
That parallel may lead some to wonder if this latest Chinese drive into Hollywood could end with similarly disappointing results that saw both studios sputter under Japanese ownership. Prickly US-China relations could also add an element of discomfort to this new budding love affair, since Beijing enjoys a far less friendly relationship with Washington than Tokyo. Read Full Post…
