Bottom line: Groupon’s new tie-up with Comcast shows it’s more interested in working with a well-known US-based company than the unfamiliar Alibaba, which could force Alibaba to quietly dump its Groupon stake by the end of this year.
Comcast buys into Groupon
It seems e-commerce giant Alibaba (NYSE: BABA) isn’t the only company interested in money-losing group buying site Groupon (Nasdaq: GRPN). Less than 2 months after Alibaba disclosed it had purchased 5 percent of Groupon shares, apparently in the open market, a firm backed by US cable giant Comcast (Nasdaq: CMCSA) has just announced plans for its own strategic tie-up with the faded group buying site.
This new move certainly seems to throw some doubt on my previous prediction that Alibaba’s purchase could presage a boosting of its stake in Groupon, or perhaps even an outright buyout bid. While such a move is still possible, Groupon does seem to be signaling that it intends to remain independent. It also seems to be indicating it prefers this more direct approach to forming new partnerships, rather than Alibaba’s approach that looks a bit stealthier since it appeared to buy its Groupon shares without the company’s consent. Read Full Post…
I have to admit I was quite skeptical when our city launched a new campaign to clean up Shanghai’s streets of rude and unruly drivers a couple of weeks ago. After all, such campaigns are quite common here, and usually last for just a day or two before city officials seem to lose interest and redeploy their resources elsewhere.
But lately I’ve had to rethink my initial stance, and am even starting to hold out a glimmer of hope for improvement, as the campaign remains in the spotlight and appears to be maintaining momentum a full 2 weeks after its launch. Read Full Post…
The following press releases and news reports about China companies were carried on April 2-5. To view a full article or story, click on the link next to the headline.
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China’s XIO Group Vies for US Auto Consultant JD Power – Sources (English article)
Huawei Posts Strongest Revenue Growth in 7 Years for 2015 (English article)
Tesla (Nasdaq: TSLA) Unveils Model 3, May Target Future China Production (Chinese article)
Finland’s Okmetic (Helsinki: OKM1V) Gets Takeover Bid from China’s National Silicon (English article)
Lenovo (HKEx: 992) Changes Motorola Brand Name to Moto on Smartphones (English article)
Bottom line: A high-profile China visit by Google CEO Sundar Pichai reflects warming ties between the company and Beijing, and presages a probable launch of the Google Play app store and Nexus phones in China by the end of this year.
Google’s Pichai in high-stakes game with Beijing
In a move that looks like something from a high-stakes chess game, Google’s (Nasdaq: GOOG) CEO is taking advantage of the huge publicity surrounding a recent triumph of his company’s artificial intelligence (AI) to make a high-profile visit to China. Google is hardly a welcome name in the country, following its high-profile spat in 2010 over Beijing’s strict self-censorship policies that prompted it to shutter its China-based search service.
Since that blow-up, however, Google has more recently been gingerly tip-toeing back to China. Reports through much of last year indicated the company was making necessary preparations to launch a Chinese version of its Google Play app store, possibly in hopes of selling its Nexus brand of smartphones in the world’s largest mobile market. Read Full Post…
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…
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: 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: 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…
Bottom line: Trina’s new loan and BYD’s uncertain outlook for EV sales this year reflect continued reliance of new energy technology companies on state support, which could pressure them as government incentives get retired.
Trina, BYD fueled by state support
Two new energy stories are in the headlines today, reflecting the progress but also the continued reliance on government support that this up-and-coming group of companies faces. That particular reality isn’t new, though some who were hoping the industries would become commercially independent more quickly may be disappointed. But more important, this reality could challenge many of the companies in the next 2-3 years in the face of disappearing support from governments that believe they have already given enough incentives to this slowly-developing group.
The first development has solar panel maker Trina (NYSE: TSL) announcing $143 million in financing for a new plant in Thailand, with all of the money coming from local lenders that almost certainly have government ties. The second has electric car maker BYD (HKEx: 1211; Shenzhen: 002594) reporting annual results that showed a surge in its EV business last year thanks to government incentives, setting the stage for a possible rapid slowdown this year as those incentives get set to retire. Read Full Post…
