Bottom line: The 5 percent drop in China smartphone sales during the first quarter reflects the market’s current state of saturation, which will lead to more bankruptcies this year for suppliers and second-tier brands.
Xiaomi slips to third in China smartphone market
New data from China are shining a spotlight on the sudden slipping of global giant Apple (Nasdaq: AAPL) in the world’s largest smartphone market, as well as the slower decline of homegrown challenger Xiaomi. At the same time, the 5 percent decline in first-quarter shipments in the huge but intensely competitive China market bodes poorly for everyone. That includes a growing number of suppliers to the big brands like contract manufacturing giant FIH Mobile (HKEx: 2038), which has just warned that its profits are coming under intense pressure.
Much has been written about the effects that intense competition are having on Chinese smartphone brands, many of which are either barely profitable or are even losing money. But the toll has been even bigger on many of their suppliers like FIH, which makes phones for the likes of Xioami and Sony (Tokyo: 6758) and are coming under even bigger pressure due to slowing orders and cries from their customers for lower prices. Read Full Post…
Bottom line: The CSRC’s reported plans for a backdoor listing quota for companies returning to China from New York should restore confidence that well-conceived buyout plans by big names like Qihoo will succeed.
Regulator reopens gate for backdoor listings in China
After a massive sell-off at the beginning of the week on concerns of a major new roadblock to their homecoming plans, Chinese companies privatizing from New York have seen their shares rebound sharply on reports of a regulatory compromise that would allow them to re-list in China. The story is mostly based on rumors about an internal debate within the China Securities Regulatory Commission (CSRC), China’s stock regulator, which is worried about a potential future flood of backdoor listings by local companies now privatizing from New York.
The sell-off for companies like Qihoo (NYSE: QIHU), Momo (Nasdaq: MOMO) and 21Vianet (Nasdaq: VNET) at the start of this week came after reports emerged saying the CSRC might halt all such backdoor listings, which typically see a company inject its assets into an existing listed shell company. The regulator took the unusual step of saying it was simply studying the issue, but that didn’t ease concerns that New York privatization bids for Qihoo and others might collapse if backdoor re-listing route in China was closed. Read Full Post…
Bottom line: Baidu’s new policy of greater transparency in its search results is long overdue, and is unlikely to have a major impact on its business due to lack of other choices for advertisers in the China search market.
Baidu cleans up search site
What a difference a week makes. After coming under unprecedented assault for putting profits above everything else, leading search engine Baidu (Nasdaq: BIDU) has just done a major overhaul of its core search service to make it more transparent and useful. The overhaul was long overdue but was hardly voluntary, and only came after the company faced the biggest crisis since its founding in 2000.
It’s somewhat ironic that this particular crisis took so long to come, since the kinds of misleading practices at the center of the controversy are widely known and central to Baidu’s huge profitability. Those practices include selling preferred positions on search results pages to advertisers who pay the highest prices, even though that fact was never clearly conveyed to Internet users. Read Full Post…
Bottom line: A favorable court ruling in a trademark dispute is the latest positive step for Facebook in China, and reinforces a view that it could get permission to open a Chinese service within the next year.
Facebook wins trademark ruling in Beijing
Social networking giant Facebook (Nasdaq: FB) may be absent on the China Internet, but a new victory in a local trademark dispute shows its name is gaining traction in the Chinese legal system. Some are pointing out that Facebook’s victory against a beverage maker that tried to register its trademark contrasts sharply with the loss in a similar case last week for US smartphone giant Apple (Nasdaq: AAPL). (previous post)
While both decisions came from courts in Beijing, it’s probably a bit unfair to compare the 2 since each has to be considered based on individual facts and evidence. But this latest trademark victory does appear to show that Facebook founder Mark Zuckerberg’s strategy of currying favor with Beijing may be producing results, as he pursues his ultimate goal of launching a Chinese version of his social networking service (SNS). Read Full Post…
Bottom line: Many privatization bids by Chinese firms hoping to re-list in China could collapse if the CSRC cracks down on backdoor listings, though de-listing plans backed by big private equity names could still succeed.
Privatizing shares tumble on CSRC rumors
Rumors that they might get a chilly reception from China’s securities regulator has sparked a major sell-off for shares of US-traded companies trying to privatize and re-list at home in search of higher valuations. The dive is one of the largest I’ve seen for any single group in quite a while, and could present a great buying opportunity for anyone who believes these companies can still successfully privatize and re-list in China.
But in this case I might be more inclined to agree with the pessimists, since China’s securities regulator is quite conservative, even though I’ve said it should continue to allow these re-listings. (previous post) In this case the China Securities Regulatory Commission (CSRC) may also be acting under direct orders from Beijing, which is already worried about another major sell-off on domestic stock exchanges like one early this year. Read Full Post…
Bottom line: Baidu’s shares could see more downside of 5-10 percent as a scandal involving its core search service plays out, but its dominant position means its business is unlikely to suffer a major longer term impact from the crisis.
Baidu ordered to clean up search results
It seems that I was wrong when I predicted that a scandal surrounding search leader Baidu (Nasdaq: BIDU) would quickly blow over and not much would change in the company’s misleading ways for displaying search results. The company is still at the center of major headlines In the second week since the scandal broke, this time getting ordered to change the way it displays search results.
That order was part of a broader set of government directives telling Baidu to change its ways, and other reports indicated the company has already taken down ads from thousands of medical companies. Such moves could theoretically have a major impact on Baidu’s lucrative search business, since hospitals, drug companies and medical device makers reportedly account for a very large part of its advertising revenue. Read Full Post…
Bottom line: The CSRC should take steps to better regulate backdoor listings by Chinese companies privatizing from New York to ensure market stability, but shouldn’t ban the process completely.
CSRC weighs closing backdoor listings
Chinese companies planning to re-list at home after disappointing results with overseas IPOs got some troublesome signals last week, when rumors emerged that China’s securities regulator might be planning to slow or halt a mechanism that has quickly become the preferred route for such homecomings.
That mechanism has seen newly privatized companies make back-door listings using Shenzhen- and Shanghai-traded firms that are often just shells of former state-run enterprises whose own businesses have withered. Returning companies have chosen such a path because conventional IPOs in China have slowed to a crawl due to the regulator’s concerns about market volatility, creating a huge waiting line for new listings. Read Full Post…
Bottom line: More big global brands are likely to leave a major US anti-piracy group after its admission of Alibaba, which will suffer some negative publicity as it tries to clean up its sites of trafficking in fake goods.
Gucci quits US anti-piracy group after Alibaba joins
How would you feel if your former foe who constantly stole from you suddenly applied for membership in one of your favorite clubs? The answer is “probably not very happy”, which has led luxury goods giant Gucci to abruptly resign from a global anti-counterfeiting group after it admitted Chinese e-commerce leader Alibaba (NYSE: BABA) as its newest member.
This pair of companies have plenty of bad blood between them due to Gucci’s allegations of pirated goods being sold over Alibaba’s popular online marketplaces. Gucci parent Kering has sued Alibaba twice over the issue, most recently a year ago in New York, accusing the Chinese company of knowingly assisting in trade of counterfeit goods over its platforms and profiting from the process. Read Full Post…
Bottom line: Tiger Brokers could see strong growth by banking on Chinese demand for US and Hong Kong stocks, but also faces some risk if Beijing decides to regulate the company as a financial firm.
Tiger Brokers eyes Chinese with appetite for US, HK stocks
I’m kicking off my new series on noteworthy venture-backed companies with the fast-growing Tiger Brokers, which is feeding off a Chinese love of stocks and growing demand for access to overseas markets. In the current climate where China’s own stock markets have become quite volatile and prone to big sell-offs, Tiger’s gateway to the US and Hong Kong stock markets could prove a potent draw to Chinese traders looking to diversify their portfolios with international stocks from more mature markets.
In a small but highly symbolic footnote to this story, Tiger is also finally giving Chinese investors access to many of China’s hottest companies that are traded overseas, including the Internet “big 3” of Baidu (Nasdaq: BIDU), Alibaba (NYSE: BABA) and Tencent (HKEx: 700). That could ultimately provide some upside for many of those stocks over the longer term, since Chinese investors are likely to boost trading volumes for many of these homegrown companies whose shares previously languished due to lack of familiarity among western investors. Read Full Post…
Bottom line: A flurry of new corporate crackdowns will have the biggest impact on Baidu due to its role in a scandal over false advertising claims, and indicates this year’s summer crackdown season could be hotter than usual.
China cracks down on web merchants, drug makers
Summertime in China is a season for crackdowns, and we’re getting a taste of a potentially hot summer ahead fueled by a high-profile scandal involving false advertising claims on leading search engine Baidu (Nasdaq: BIDU). Three separate crackdowns are in the headlines as we begin the new week, including 2 that look potentially tied to the Baidu scandal.
That scandal consumed China for much of last week, after a student with cancer claimed he was duped into seeking treatment at a hospital that made false claims about its ability to treat his disease. (previous post) In his long list of complaints before he died of his illness, Wang Zexi also accused Baidu of deception for putting the hospital and its inflated claims high in his search results simply because the hospital paid a rich premium for such high placement. Read Full Post…
More than a month after Shanghai launched its campaign to tame our unruly traffic, I want to use this space to call for a similar campaign that is badly needed to clean up our city’s increasingly chaotic sidewalks. Anyone who lives here will know I’m talking about the legions of delivery bikes and scooters that have exploded onto Shanghai’s sidewalks over the last few years, creating a nightmare for those of us who actually use sidewalks for walking.
This particular tale began 5 or 6 years ago with the rapid rise of e-commerce, which spawned a flood of courier services delivering everything from major items like computers and furniture to tiny parcels like USB thumb drives. But the problem has become much worse over the last year with a newer explosion of take-out dining services, which have unleashed thousands more bikes and scooters onto our sidewalks. Read Full Post…
