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INTERNET: Baidu Rejigs Maps in Face of Competition

By newsdoug on March 15, 2018

Bottom line: Baidu’s reorganization of its mapping unit reflects growing competition in the space, and could ultimately end in a shuttering of the service if its usage continues to decline.

Baidu mapping service charts new direction

The wheels of restlessness at online search leader Baidu (Nasdaq: BIDU) are grinding into motion once more, with word that the company has made a major shift in its popular mapping division. Company watchers will know the restlessness to which I refer is a direct reference to Baidu’s founder Robin Li, who is famous for getting into new businesses, only to tire of and ultimately jettison them after just a few years.

In this case it’s probably far too early to say if that’s the case for Baidu’s mapping unit, which has been one of its most popular products for quite some time, thanks in no small part to its dominance in online search. The problem is that Baidu has failed to keep pace with more nimble competition, most notably from the Alibaba-owned (NYSE: BABA) AutoNavi. What’s more, an equally large potential rival is looming in the form of global giant Google (Nasdaq: GOOG), which has recently begun updating its previously dormant China mapping service. Read Full Post…

STOCKS: China Eyes Quick Route Home for Offshore-Listed Firms

By newsdoug on March 7, 2018

Bottom line: A new plan allowing offshore listed Chinese firms like Alibaba and Tencent to make secondary listings at home appears to have momentum and could stand a better than 50 percent chance of success.

China eyes new plan to bring home NY-, HK-listed firms

A mix of politics and business is in the air this week, as the annual National People’s Congress takes place in Beijing, including a concurrent gathering of business leaders who advise the nation’s legislature. Those leaders include most of the country’s leading high-tech CEOs, who are all getting peppered with questions about whether they would re-list at home if given the chance.

Most of those leaders are doing the politically correct thing and saying “of course,” including chiefs of Internet giants Baidu (Nasdaq: BIDU), Tencent (HKEx; 700) and Ctrip (Nasdaq: CTRP), just to name a few. (Chinese article) Such talk is really a bit cheap and would be quite impractical in the current market, since de-listing such massive firms from their current markets would require tens of billions of dollars in most cases, and even hundreds of billions in the case of a massive company like Tencent. Read Full Post…

E-COMMERCE: Alibaba Salivates at Ele.me in ‘New Retail’ Vision

By newsdoug on February 28, 2018

Bottom line: Alibaba’s potential purchase of Ele.me could be the biggest piece yet in its pursuit of a “new retail” model, but could result in a case of indigestion as it tries to make the company profitable.

When it comes to acquisitions, e-commerce giant Alibaba (NYSE: BABA) seems to have an insatiable appetite these days. After investing some 80 billion yuan ($12.7 billion) in brick-and-mortar retailing over the last couple of years, the company is now setting its eyes on take-out dining specialist Ele.me, in a deal that could cost it around another $5 billion.

This particular buying binge does seem a bit more focused than Alibaba’s previous M&A patterns, which always felt a bit more random to me and covered a wide range of areas. In this instance, the company is pursuing founder Jack Ma’s vision of a “new retail” landscape that will combine Alibaba’s mastery of e-commerce with more traditional brick-and-mortar retailing. Read Full Post…

FINANCE: Ant Financial Crawls Back Into Bed with Alibaba

By newsdoug on February 2, 2018

Bottom line: Alibaba’s purchase of 33 percent of Ant Financial looks like a shrewd move for both firms, making Ant more attractive in the run-up to an IPO likely to be one of the world’s biggest this year.

In what looks like a homecoming of sorts, e-commerce giant Alibaba (NYSE: BABA) has just announced it is taking back a major stake in its Ant Financial affiliate. Followers of this pair will know they have quite a long and complex relationship, and were actually once part of the same company. But they were split apart around a decade ago for political reasons, which apparently aren’t an issue anymore.

The other major plank to this story is Ant’s own story, including the unusual way in which this deal was structured. The company, whose core asset is the popular Alipay electronic payments service, is gearing up for what could be one of the biggest fintech IPOs of this year, likely to raise several billion dollars in Hong Kong. Thus this particular move could be designed to draw more attention to this lesser-known Alibaba offspring, and also to relieve it of some of its financial burden in the run-up to that offering. Read Full Post…

INTERNET: Toutiao Sues Baidu Over Search Abuse

By newsdoug on January 31, 2018

Bottom line: Baidu’s anti-competitive behavior alleged in a lawsuit by Jinri Toutiao won’t have a long-term effect on its stock, but will draw the attention of an increasingly assertive anti-trust regulator.

Toutiao sues Baidu for manipulating search results

A humorous war of words has broken out between search leader Baidu (Nasdaq: BIDU) and news aggregating app Jinri Toutiao, also sometimes called Today’s Headlines, over unfair competition in the form of search manipulation. I’ll detail the allegations shortly. But on a more serious note, this particular lawsuit does raise the question of whether a search engine like Baidu is obliged to be objective in its results. Moreover, it could also open the company to allegations of abusing its market-leading position with anti-competitive actions.

This kind of monopoly-like position has become a growing issue on China’s Internet, which has recently shed the notion of being too small for antitrust treatment. The original BAT of Baidu, Alibaba (NYSE: BABA) and Tencent (HKEx: 700) all now hold positions in search, e-commerce and games, respectively, that are quite lucrative and might be considered monopolies in many other markets. I personally would consider all three monopolies in China in terms of their ability to dominate their respective markets, and I suspect the regulator may someday attempt to challenge them the way that Google (Nasdaq: GOOG) and Facebook (Nasdaq: FB) are now getting challenged in the rest of the world. Read Full Post…

INTERNET: Trump-Ma Honeymoon Ends as Alibaba Lands on US Black List

By newsdoug on January 18, 2018

Bottom line: The inclusion of Alibaba’s Taobao marketplace on the latest edition of a US blacklist for piracy signals US is taking a tougher line on trade issues.

Alibaba calls itself ‘scapegoat’ after landing on US blacklist

What a difference a year makes. It was just about this time a year ago that Alibaba (NYSE: BABA) founder Jack Ma scored a major coup by becoming the first major Chinese business leader to score a visit with incoming US President Donald Trump. (previous post) The pair were all smiles back then, with Ma trumpeting a plan to create 1 million American jobs by helping US businesses selling their products into China over Alibaba’s popular e-commerce platforms.

Fast forward to the present, where Ma isn’t smiling anymore, and Alibaba has even taken the unusual step of accusing Trump of making the company into a scapegoat in a growing tide of US protectionism. The abrupt turnabout hinges on two major developments, the most recent being the placement of Alibaba’s consumer-to-consumer (C2C) Taobao website on Washington’s annual “notorious” list of marketplaces with rampant trafficking in pirated goods. That follows another setback for Ma earlier this month when a plan by his Ant Financial saw its plan for a major US acquisition crushed by the Trump administration. Read Full Post…

FINANCE: US Squashes Ant Financial’s MoneyGram Dream

By newsdoug on January 3, 2018

Bottom line: The collapse of Ant Financial’s purchase of MoneyGram reflects growing resistance from a Trump administration willing to mix business and politics in its relationship with China.

In yet the latest sign that the Donald Trump administration intends to take a hard line towards Chinese M&A, Washington has killed a $1.2 billion deal that would have seen Alibaba-affiliated (NYSE: BABA) Ant Financial purchase US money-transfer specialist MoneyGram (Nasdaq: MGI). This particular development isn’t a huge surprise, since the deal was first announced about a year ago and its closure deadline was extended several times while the US hemmed and hawed on its national security review.

The de facto veto is also just the latest move by a Trump administration that has shown it won’t let US companies in the strategic tech and financial industries be acquired by Chinese counterparts. But this particular veto is also noteworthy because it’s one of the largest so far involving a purely private sector Chinese buyer. Up to now, nearly all the deals to be vetoed have come from buyers with strong links to Beijing, either directly or through government-supplied financing. Read Full Post…

E-COMMERCE: Alibaba’s New Retail Goes on Steroids with Grocery Plan

By newsdoug on December 11, 2017

Bottom line: Alibaba’s plan to roll out 2,000 of its high-tech Hema grocery stores looks overly aggressive but typical for the company, and could prove costly if the concept fails to catch on.

E-commerce giant Alibaba (NYSE: BABA) is pretty much a carbon copy of its founder Jack Ma when it comes to standing still, in that the concept is completely foreign to both. I’ve been critical of the company in the past for getting into too many things too quickly without a coherent big-picture plan, and that’s what seems to be happening once more with Alibaba’s sudden obsession with finding a formula for the “new retail”.

Alibaba seems quite certain that retailing of the future will consist of some form of high-tech features, alongside traditional retailing concepts such as stores where actual products are sold and people can sit down for a fresh-cooked meal. Alibaba has been wheeling out a number of concepts on this new high-tech retail puzzle over the past year, but the latest plan is the first I’ve seen for an actual widespread roll-out of an actual chain. Read Full Post…

INTERNET: Tencent Rockets Up Global Tech Value Charts

By newsdoug on November 23, 2017

Bottom line: Tencent and Alibaba stocks have become overvalued at current levels compared with global peers, and are due for a pullback of up to 30 percent in 2018.

Much ado is being made about the meteoric rise in value for Tencent (HKEx: 700), the Chinese social media giant that is now neck-and-neck with global heavyweight Facebook (Nasdaq: FB). Specifically, the pair now boast nearly identical market values in the $520-$530 billion range, which one report points out is larger than the entire GDP of Taiwan. That makes them the world’s fifth and sixth largest companies by market cap.

Such a reality would have been unthinkable just four or five years ago, when the only Chinese companies that ever periodically made the global top 10 were big state-run firms like banking giant ICBC (HKEx: 1398), which were government owned behemoths operating in highly protected sectors. Tencent breaks that pattern, as the company is most decidedly private, and also operates in a highly competitive but also high growth area in the online realm. Read Full Post…

RETAIL: Alibaba Boosts Grocery Rush with Sun Art Investment

By newsdoug on November 20, 2017

Bottom line: Alibaba’s new investment in grocery operator Sun Art looks like a shrewd move into an area where logical synergies between online and offline shopping can be achieved.

After a period of relative quiet, e-commerce giant Alibaba (NYSE: BABA) is splashing back into the major M&A headlines with its purchase of a major stake in grocery retailer Sun Art (HK: 6808) for HK$22.4 billion ($2.9 billion). This particular deal looks strikingly similar to an earlier tie-up between Alibaba’s archrival JD.com (Nasdaq: JD), which is joining online and offline grocery carts through its own older tie-up with Walmart (NYSE: WMT).

Each of these plays looks relatively savvy, acknowledging that off-line shopping will continue to play a major role in the retail experience for certain products. Alibaba has embraced this online-offline approach with a vengeance over the past year, snapping up a series of existing retail chains and also rolling out its own concept convenience store that is completely automated. Read Full Post…

IPOs: Hexindai Jumps in Trading Debut, as Fintechs Stay Warm

By newsdoug on November 6, 2017

Bottom line: The wave of strong sentiment for new offshore IPOs by Chinese companies is running out of steam, but listings before year-end could still get a slight left, especially fintechs.

Fintech is hot, and just about everything else is not. That appears to be the message with the latest offshore IPO by a Chinese firm, this time from Hexindai (Nasdaq: HX), a peer-to-peer (P2P) lender that takes in money from small investors and then lends it out to borrowers. Hexindai’s shares initially soared as much as 70 percent in their trading debut before finishing a much more modest but still comfortable 20 percent higher.

We’ll review the latest offshore IPO by a Chinese company in more detail briefly, but I thought this would also be a good opportunity to do a scorecard for a broader flurry of deals that has hit the market in the last month or two to see how they’re doing. The bottom line seems to be quite clear: IPOs from this new generation of financial technology companies, or fintech, are generally doing ok, while just about everyone else is now below their IPO prices. Read Full Post…