Bottom line: Alibaba and Tencent are likely to find themselves in a growing number of clashes in the year ahead due to consolidation involving their investments at home and a limited number of opportunities abroad.
Alibaba, Tencent back rival Korean Internet banks
In what’s shaping up as a trend for the year ahead, Tencent(HKEx: 700) and Alibaba(NYSE: BABA) are clashing once again in a newly announced South Korean Internet bank initiative in which both of China’s top Internet companies have an interest. It may be slightly overstated to call this particular instance a clash, since stakes held by Alibaba-affiliated Ant Financial and Tencent in 2 newly formed Korean Internet banks are probably quite small, probably at 5 percent or less.
But the reality is that these 2 Internet titans are increasingly clashing in a growing number of instances, as each invests in a wide array of areas to expand beyond their core businesses both inside and out of China. Those investments have put the pair in awkward situations in 2 of China’s largest Internet M&A deals this year, one involving the formation of hired car services giant Didi Kuaidi, and the other in a newer deal that has Meituan and Dianping merging to form a new leader in the group buying space. Read Full Post…
The following press releases and media reports about Chinese companies were carried on December 3. To view a full article or story, click on the link next to the headline.
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P2P Lending Operator Lufax Said to Seek $1 Bln at $15 Bln Value (English article)
Qualcomm (Nasdaq: QCOM) Jumps Most in 4 Years on Patent Deal With Xiaomi (English article)
Facebook (Nasdaq: FB) Plans First Asia-Pacific Data Center in Taiwan – Govt Official (English article)
Unicom (HKEx: 762) in New Management Shuffle at Provincial Offices – Source (Chinese article)
Yingli Green Energy (NYSE: YGE) Reports Q3 Results (PRNewswire)
Bottom line: Lukewarm receptions for new IPOs by Bank of Jinzhou and STO Express reflect investor concerns about Chinese banks and parcel delivery firms, and more broadly worries about China’s economic slowdown.
STO Express races toward Shenzhen listing
The New York market for Chinese IPOs may be dormant as 2015 draws to a close, but Hong Kong and China’s domestic markets are buzzing this week as Beijing lifts a months-long ban on new offerings imposed during a major summer sell-off. As new listings resume, investors are showing strong skepticism towards 2 of the more market-oriented offerings getting set to hit the market, one in Hong Kong from regional lender Bank of Jinzhou (HKEx: 416) and the other in Shenzhen from leading private parcel delivery firm STO Express.
Both of these offerings are probably better indicators of true market sentiment than the many other IPOs getting set to launch in Shanghai and Shenzhen with the end of the 4-month ban. That’s because investors in both of these deals are more market oriented, unlike many of the other deals whose shares are being purchased by mainland speculators who have little interest or understanding of the companies they’re buying into. Read Full Post…
Bottom line: CMC’s purchase of a stake in the parent of the Manchester City soccer club looks at least partly political, and could be followed by similar purchases by Alibaba or LeTV next year as companies try to earn goodwill from Beijing.
CMC buys into global soccer
Anyone who thought the entrepreneurial China Media Capital (CMC) might represent a new breed of market-oriented Chinese investors will be disappointed to learn the company’s latest purchase looks quite political and aimed at pleasing Beijing. That investment has the Shanghai-based CMC teaming up with the financial giant Citic Group, another highly political animal, to buy 13 percent of a company whose prize asset is the Manchester City soccer club.
I’m probably being slightly unfair in calling this move purely political, since China is certainly a soccer-crazy country that could benefit from the expertise that CMC will get through its investment in City Football Group (CFG). But the timing of this deal looks quite suspicious, as it comes just weeks after Chinese President Xi Jinping visited the team during a tour of Britain, where he released a plan to turn China into a soccer powerhouse. Read Full Post…
As this year’s first blast of winter made headlines in Shanghai, another item on a new program to curb bicycle theft transported me back to a warmer time that now seems like a distant memory from China’s past. Anyone who spent time here in the 1990s or earlier clearly remembers that past, when bicycles were the main mode of private transport and ruled the streets of everywhere from top-tier cities like Shanghai all the way down to the smallest rural villages.
Those days are mostly gone in the present, when car ownership has become one of several prerequisites for young city dwellers seeking to attract future partners in today’s Shanghai. But the growing problems of congestion and pollution are making Shanghai think twice about the desirability of too much car ownership, which perhaps is behind a growing number of recent programs like this one aimed at easing concerns about things like theft and inconvenience. Read Full Post…
The following press releases and media reports about Chinese companies were carried on December 2. To view a full article or story, click on the link next to the headline.
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Qihoo 360 (NYSE: QIHU) May Reach Buyout Deal Within Weeks – Source (Chinese article)
Manchester City Group Sells 13 Pct to Chinese Investors for $400 Mln (English article)
CMGE Seeks Relisting in China Months After Dropping From Nasdaq (English article)
Alibaba (NYSE: BABA Appoints Leaders to Run France, Germany Operations (Businesswire)
Fosun Pharma (Shanghai: 600196) Buys $65 Mln Stake in Online Health Firm Guahao (English article)
Bottom line: iKang’s managers may have to raise their earlier buyout offer to counter a new rival bid for the company, which could embolden investors to demand similar better prices for other US-listed Chinese companies being privatized.
Bidding war erupts for iKang
An interesting new wrinkle has entered the recent privatization wave sweeping US-listed Chinese companies, with word that a group backed by some major investors is making a rival buyout offer for medical clinic operator iKang (Nasdaq: KANG). So far as I know, this is the first case of a rival bid emerging to challenge any of the nearly 3 dozen privatization offers to emerge this year, mostly from management-led groups.
That’s not to say that this latest development is completely unexpected. Many minority stakeholders have complained loudly that most of the management-led buyout offers to be announced so far grossly undervalue the companies. Those complaints have worked once or twice, most notably in the case of online dating site Jiayuan (Nasdaq: DATE), whose non-management suitor sharply raised its buyout offer after investors complained that the original bid was too low. (previous post) Read Full Post…
Bottom line: 58.com’s latest quarterly results reveal a case of indigestion after its recent M&A binge, but the company could emerge as a new Chinese Internet leader if can successfully digest those assets over the next 2-3 quarters.
58.com gets M&A indigestion
Leading online classified site 58.com (NYSE: WUBA) has always been a company to watch, due to its market leading position that has led many to call it the Craigslist of China. But the company is suffering from a case of indigestion in its latest earnings report, which revealed a massive loss that shows it needs to take time from its recent buying spree to digest some of those newly purchased assets.
Investors didn’t seem too worried about the report, and actually bid up 58.com’s shares by 3.6 percent after its latest report came out, sending them to a 4-month high. With a current market value of $8.4 billion, 58.com is quickly emerging as one of China’s biggest Internet companies, behind only the big 3 of Alibaba(NYSE: BABA), Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU), as well a handful of other sector leaders like Ctrip (Nasdaq: CTRP). Read Full Post…
Bottom line: Beijing should eliminate barriers that are slowing the flow of private money into lending services, in a move to offset a slowdown in lending from traditional banks that are dealing with a growing bad-loan crisis.
Obstacles hinder private lending growth
A flurry of headlines last week highlighted the recent move by private companies into China’s financial services market, led by reports that Apple(Nasdaq: AAPL) could become the first major foreign company to offer electronic payments in the country. At the same time, a chilly reception for a Hong Kong IPO by regional lender Qingdao Bank (HKEx: 3866) highlighted the difficulties many traditional Chinese banks now face due to concerns about a looming bad debt crisis.
Beijing regulators should be commended for their recent efforts to open up the financial services market to more private investment, but should consider accelerating the campaign by streamlining bureaucracy for big and well-financed domestic and foreign names like Apple and Tencent(HKEx: 700). It should also consider a similar streamlining of bureaucracy for foreign banks, many of which have left China off their global roadmaps due to stiff restrictions that make doing business difficult. Read Full Post…
The following press releases and media reports about Chinese companies were carried on December 1. To view a full article or story, click on the link next to the headline.
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Bank of Jinzhou (HKEx: 416) Said to Be Poised to Raise $794 Mln in IPO (English article)
Ant Financial-Backed Korean Internet Bank Wins Approval (Chinese article)
Bottom line: Huawei’s strong sales for its Mate line of mid-range smartphones and positive coverage of Apple’s newest China store opening spotlight 2 of this year’s top Chinese smartphone trends, which should continue into next year.
Huawei aims high with Mate 8 launch
A couple of smartphone headlines are spotlighting 2 of this year’s top trends in the market, namely the rapid rise of Huaweiand the remarkable turnaround in China for Apple(Nasdaq: AAPL). The first headline has Huawei announcing lofty targets for the latest model from its line of mid-range smartphones. The second has Beijing becoming Apple’s unofficial Asian capital, with the opening of its fifth store in the city — more than any other in Asia.
Both of these stories are quite remarkable, as each represents a major shift from previous trends in 2014. Huawei has struggled for the last few years to differentiate itself from a crowded field of domestic smartphone makers, but finally emerged as a leader this year based on its better product designs. Similarly, Apple’s recent surge marked a major turnaround from the last few years, when its reputation took a beating in China due to poor relations with Beijing. Read Full Post…
