Tag Archives: Goldman Sachs

Bank of China Results: Downturn Ahead 中行业绩黯淡 或预示银行业将迎来低迷期

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Bank of China (HKEx: 3988; Shanghai: 601398) made news earlier this week when it became China’s first member at the prestigious London Metals Exchange (English article), but its latest headlines are far less positive as it reported lackluster growth in the first quarter that was below market expectations. (earnings announcement; English article) The 10 percent profit growth for the quarter was less than half the 28 percent growth rate from a year earlier, when Bank of China and its peers were reaping big new profits after a lending binge ordered by Beijing to stimulate the domestic economy during the global economic crisis. With the economy now showing signs of slowing sharply as the government tries to cool the real estate market and tame inflation, many fear that Chinese banks could start to see many of the loans they made during that binge start to sour. Recent weakness in the stock market, following a rally early in the year, could add to the problems, as many recent bank loans have gone to fund stock buying. From a purely numerical perspective, Bank of China’s 10 percent profit rise doesn’t look too bad, since that kind of growth rate is certainly respectable. But more worrisome is growth rate’s slowing, which is likely to accelerate in the next 2 quarters and could even turn negative by the end of the year. Bank of China is one of the nation’s top 4 lenders, and first-quarter results will come out later today from the other 3, ICBC (HKEx: 1398; Shanghai: 601398), China Construction Bank (HKEx: 939; Shanghai: 601939) and Agricultural Bank of China (HKEx: 1288; Shanghai: 601288). I would expect all 3 of the other big lenders to report slowing profit growth as well, signalling a recent rally for their stocks could soon be finished. Most of China’s major bank stocks performed poorly for most of last year on concerns that they would soon face a flood of bad loans after the lending binge of 2009 and 2010. But most have bounced back since then as Beijing took steps to address the problem, including allowing many lenders to raise billions of dollars in new capital to strengthen their balance sheets. Bank of China’s own shares have risen nearly 50 percent since hitting a low early last October. Perhaps sensing that the rally may soon be over, Goldman Sachs (NYSE: GS) became the latest major shareholder in a Chinese bank to sell down its stake earlier this month, dumping more of its stock in ICBC. (previous post) Goldman joined Bank of America (NYSE: BAC) and Citigroup (NYSE: C), which last year also sold off large stakes in China Construction Bank and Pudong Development Bank (Shanghai: 600000), respectively, partly due to concerns about a looming Chinese banking crisis. Following this lackluster Bank of China earnings report, investors will be watching closely to see if the other 3 banks also report weak earnings, and also if any are showing signs of growing bad loans. If the reports are weak, which seems likely, look for a sell-off in Chinese banking shares next week, which could mark the beginning of a long downturn for the sector.

Bottom line: Bank of China’s lackluster first-quarter report could mark the beginning of a long downturn for Chinese lenders and their stocks.

Related postings 相关文章:

◙ Goldman Flees ICBC as Bank Crisis Looms 中国银行业危机隐现 高盛迅速转让工行股票

◙ UnionPay Stirs IPO Pot With Big Numbers 银联有望上市

◙ AgBank Results: First Look at Banking Winter 中国农业银行财报：银行业的冬天

MoneyGram In Latest Financial Services Move 速汇金携手中行 提供汇款服务

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After years of watching the major global banks first pile into China only to more recently retreat, it’s refreshing to see a new wave of lower-key investments and tie-ups coming into the country again from second-tier players with more realistic expectations for the market. The latest in this string of lower-profile deals has MoneyGram (NYSE: MGI) signing a deal to provide its specialty money-transferring services through Bank of China’s (HKEx: 3988; Shanghai: 601988) more than 10,000 branches nationwide. (company announcement) The deal sharply expands a previous tie-up that had the pair offering MoneyGram’s services at a much smaller 240 Bank of China branches in Beijing, and is clearly targeted at the growing number of Chinese living overseas, who now send an estimated $57 billion home each year. The deal follows another similar expansion of a tie-up between MoneyGram and ICBC (HKEx: 1398; Shanghai: 601398), another of China’s top 4 banks, aimed at money transfers between Japan and China. Other interesting lower-key deals in recent months have included an investment in a domestic electronic payments company called Lianlian by American Express (NYSE: AXP) (previous post), and several major tie-ups between foreign banks with UnionPay, China’s operator of a financial settlements network similar to the Cirrus and Plus networks operated by MasterCard (NYSE: MA) and Visa (NYSE: V). PayPal, the electronic payments arm of online auctions specialist eBay (Nasdaq: EBAY) has also indicated it wants to delve further into China’s domestic e-payments market, stating very clearly on several recent occasions that it has applied for a new round of licenses soon to be offered for such services. (previous post). While names like MoneyGram, PayPal and even American Express aren’t as high-profile as the more familiar global banking giants, their quieter and relatively cautious advance is a refreshing and strong contrast to big names like Citigroup (NYSE: C), Bank of America (NYSE: BAC) and Goldman Sachs (NYSE: GS), which have all recently  retreated from a market that all previously hyped as full of potential with its billion-plus consumers. Citi recently sold its long-held stake in a regional Shanghai bank, while Bank of America and Goldman have sold off most or all of their stakes in China Construction Bank (HKEx: 939; Shanghai: 601939) and ICBC, respectively. (previous post) Citi, Bank of America and Goldman were all quite bullish on China’s potential when they made their investments around 5-6 years ago; but since then they’ve discovered the tie-ups didn’t really help them to build up their China presence, and most finally sold their stakes to raise cash to bolster their balance sheets after the global financial crisis. I personally think these smaller, more targeted investments from the likes of MoneyGram, American Express and PayPal are much more realistic than the bigger headline-grabbing purchases of the big global banks, and would fully expect to see an acceleration in similar moves from other smaller global players in the next 2 years.

Bottom line: MoneyGram’s latest tie-up with Bank of China looks like a smart, targeted play at China’s financial services market, with more smaller, low-key deals likely in the next 2 years.

Related postings 相关文章:

◙ AmEx Chases E-Payments With Lianlian Link 美国运通联手中国连连集团

◙ Goldman Flees ICBC as Bank Crisis Looms 中国银行业危机隐现 高盛迅速转让工行股票

◙ New UnionPay Tie-Up Boosts US Presence in IPO Run-up 中国银联携手US Bancorp 未来有望两地上市

Goldman Flees ICBC as Bank Crisis Looms 中国银行业危机隐现 高盛迅速转让工行股票

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Everyone is buzzing over word that Goldman Sachs (NYSE: GS) will sell down nearly half of its remaining stake in ICBC (HKEx: 1398; Shanghai: 601398), the world’s largest bank by market cap, with analysts saying Goldman will net a tidy return on this investment made over six years ago before ICBC’s mega-IPO. (English article) But in my view they’re missing the point, as this sale is less a sign of satisfaction and more one of concern, as China’s banks stand on the cusp of a meltdown that could see their bad assets balloon and their share prices tumble in the next 2 years. That concern could easily snowball in the months ahead if China’s big banks really start to see their bad loans jump, leading Goldman to offload its entire remaining stake and perhaps even prompting American Express (NYSE: AXP), one of the banks’ last remaining major western investors, to dump its own ICBC holdings as well. Let’s take a look at the news first, which has western media reporting that Goldman is raising $2.5 billion by selling about 40 percent of its current ICBC holdings to Temasek, the Singaporean sovereign wealth fund. Goldman is selling the stake for about 3 percent less than its publicly traded price before the news broke, representing a fairly modest discount all things considered. This latest sale comes just 5 months after Goldman sold down another $1.5 billion worth of ICBC stock late last year. At around the same time, Bank of America (NYSE: BAC) also sold a its remaining stake in China Construction Bank (HKEx: 939; Shanghai: 601939), as it completely unloaded its 10 percent of the Hong Kong-listed shares of China’s second largest lender over the course of last year. Citigroup (NYSE: C) joined the exodus last month, when it also sold off its long-held stake in a smaller lender, Pudong Development Bank (Shanghai: 600000). Other major western banks that previously unloaded similar major investments in Chinese banks have included Royal Bank of Scotland (London: RBS) and UBS. While analysts have been pointing out that Goldman and Bank of America both need to raise their capital to meet stricter requirements imposed after the global financial crisis, the recent sales by these 2 US giants were undoubtedly also driven by fear that their China investments could rapidly plunge in value if a looming crisis for China’s banks ever materializes. China’s major lenders all survived the global financial crisis with little or no damage, mostly because all were prohibited from investing in the toxic global assets that caused the crisis in the first place. But Beijing sowed the seeds of its own financial meltdown in 2009 by ordering its banks to embark on their own lending binge as part of its 4 trillion yuan stimulus plan to prop up the Chinese economy at the height of the global turmoil. Now many of those loans — especially ones to local governments for dubious infrastructure projects — are showing signs of souring, prompting Beijing to consider a steady stream of measures to delay the inevitable wave of defaults. Worries about a looming crisis weighed heavily last year, with shares of most Chinese lenders falling during even as major global indexes rose. A rally for Chinese bank stocks early this year was most likely behind Goldman’s decision to sell now, as it sought to lock in some gains before the sector starts to sink again. Such a new sell-off has indeed   already started to happen, and could accelerate in the weeks ahead as the Chinese banks start to release their first-quarter earnings results and outlook by the end of this month. If the reports show any signs of weakness, which seems likely, look for the downward share pressure to accelerate, and for Goldman and possibly even American Express to quickly consider selling the remainder of their ICBC holdings to lock in gains while they can.

Bottom line: Goldman’s latest reduction in its ICBC stake reflects growing concern about a looming China bank crisis, with more similar sales likely in the next 6 months.

Related postings 相关文章:

◙ Foreign Banks in China: A Love Affair Ends 外资银行撤资与中国同行说再见

◙ AgBank Results: First Look at Banking Winter 中国农业银行财报：银行业的冬天

◙ More Banking Bad News From Minsheng 民生银行融资揭示银行业困境

News Digest: April 17, 2012 报摘： 2012年4月17日

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The following press releases and media reports about Chinese companies were carried on April 17. To view a full article or story, click on the link next to the headline.

══════════════════════════════════════════════════════

◙ Suning (Shenzhen: 002024) Retail Portal to Launch Travel and Wine Channels (English article)

◙ Marvel’s “Iron Man 3” to Be Co-Produced in China (Businesswire)

◙ Goldman Sachs (NYSE: GS) Said to Raise $2.5 Billion in ICBC (HKEx: 1398) Sale (English article)

◙ People’s Daily Web Site Sets IPO Price Range, Demand Strong (Chinese article)

◙ Sina (Nasdaq: SINA) Weibo Microblog Releases Ad Price List (English article)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

China Tech Start-Ups: Coming Home? 中国科技企业扎堆国内上市？

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There’s an interesting report out this morning noting that a growing number of Chinese tech start-ups that once looked like strong candidates for New York IPOs are opting for home listings instead, deterred by higher scrutiny and weak sentiment overseas and a much friendlier — if not volatile — environment on ChiNext, China’s 2-year-old Nasdaq-style enterprise board. In the latest move on that front, Chinese media are reporting a company called Baofeng, maker of a popular online and cellphone video player, has filed to make a public listing on the ChiNext, reversing its plans last year when it said it would make a 2012 listing overseas. (Chinese article) Frankly speaking, Baofeng does have the exact profile of a company that would have traditionally gone to either the Nasdaq or New York Stock Exchange to raise funds as its first choice a year ago, followed by Hong Kong as a second choice and the ChiNext as a distant third. But much has changed from a year ago, when foreign investors were still quite bullish on Chinese Internet stocks, giving them relatively rich valuations compared with peers based in more developed western markets. Such stocks have suffered a major reversal of fortune over the last year, with investors dumping their shares following a series of accounting scandals that also led to higher regulatory scrutiny and the delisting of a number of smaller players. Amid all the scandals last year, China’s securities regulator also got involved, trying to insert itself into the overseas listing process as the central government also reportedly discussed either limiting or shutting down that process completely. As far as I know, nothing specific has happened yet in terms of new Chinese government oversight, though a number of big-name western investment banks have refused to underwrite New York IPOs for some China firms over concerns about their accounting. In one of the highest profile cases, Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) both reportedly resigned from an IPO last summer for leading group buying site LaShou, which went on to hire some smaller banks but has yet to make an offering. (previous post) The lone Chinese company that did make a New York IPO this year, discount retailer Vipshop (NYSE: VIPS) was an unqualified disaster, pricing well below its indicated range and falling 30 percent since its trading debut. This new report notes that Baofeng is just the latest example of a Chinese tech start-up going to ChiNext rather than overseas, following similar moves by firms like online game developers Wushen Century Network Technology and Suzhou Snail Game. It’s probably too early to say if this move to the ChiNext will be a long-term phenomenon, and I suspect these start-ups that list there will quickly discover the market’s high volatility is far less desirable than the more stable environments in New York and Hong Kong. But if the ChiNext can implement reforms to lower volatility in the market, perhaps by opening up to more foreign investors, it could seize this opportunity to quickly position itself as a strong alternative to New York and Hong Kong for China’s vibrant field of tech start-ups.

Bottom line: A recent move by tech start-ups to China’s Nasdaq-style enterprise board could become a viable IPO alternative if the board can create a more stable listing environment.

Related postings 相关文章:

◙ China IPO Winter Goes On as Vipshop Flops 唯品会大跌，中国IPO冬季持续

◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划

◙ China IPO Train Hits Bump With Vancl Resignation 中国上市事件撞上凡客诚品CFO辞职

55tuan Restarts IPO Race With LaShou 窝窝团和拉手网重启IPO争先赛

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An IPO race pitting 2 of China’s top group buying sites, LaShou and 55tuan, is showing signs of restarting in the Year of the Dragon, though I’m still a bit dubious of whether either of these 2 companies will ever really make it to market. New reports in the Chinese media say 55tuan is denying rumors that it has scrapped plans for a New York IPO, saying it is moving forward with a timetable for an offering in the second quarter. (Chinese article) The denial marks the latest twist in a race that started to take form last summer, when both 55tuan and LaShou appeared to be moving ahead with plans for offerings to raise much-needed cash. Both companies had trouble finding underwriters for their offerings, with names like Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) resigning from LaShou’s plan (previous post), while Credit Suisse (NYSE: CS) and Merrill Lynch reportedly declined to bid for the 55tuan deal. (previous post) All the big banks were reportedly concerned about the accounting used by both companies for some of their many acquisitions, amid a broader series of accounting scandals that hammered US-listed Chinese stocks last year. LaShou ended up hiring several second tier-players, including domestic heavyweight CICC and Japan’s Nomura; but one of my sources tells me that even Nomura ended up dropping the deal and was replaced by Britain’s Barclays Capital. LaShou appeared to have the edge in the race when it made its first public IPO filing last fall, but then saw that plan derail after the US securities regulator grew suspicious and asked for more information. (previous post) That happened in November and we haven’t heard anything since then, leading me to believe that the plan could be delayed indefinitely while LaShou does some major reworking of its books to satisfy both regulators and its own underwriters. In the meantime, I’m also skeptical that 55tuan will really make a second-quarter IPO, as it is having its own problems in the highly competitive group buying space that saw it make mass layoffs last year. Turmoil in the space appeared to claim its latest victim earlier this week when Groupon.cn, which has no relation to US giant Groupon, reportedly put most of its employees on extended holiday after the Chinese New Year break. (previous post) At the end of the day, one or both of these companies could finally make it to market, but both would be well advised to wait until the end of the year when they can generate more excitement — if they have the financial resources to survive that long.

Bottom line: A second-quarter IPO timetable for group buying site 55tuan looks overly ambitious, and an offering closer to the end of the year looks both more prudent and realistic.

Related postings 相关文章:

◙ Groupon.cn Becomes 2012 First Group Buy Victim 团宝网员工被放假 中国团购业料将加速整合

◙ LaShou IPO Derails

◙ 55tuan: A Company in Denial 窝窝团拒不接受现实

Cleanup Resumes, Facebook Sniffs Out China Investors 在美上市的中国企业将继续面临“大清洗”

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The new year is bringing many questions about the future of US listings for China stocks, but one thing remains quite clear: the cleanup of the sector triggered by a series of accounting scandals last year will continue into 2012, as evidenced by the latest activity. In one of the latest signs of the ongoing cleanup, China CGame (Nasdaq: CCGM) has been notified of its pending de-listing from the Nasdaq due to its failure to hold its annual meeting on time. (Chinese article) The company’s stock  currently trades at just 17 cents per share, meaning it also is well below the $1 level necessary for a Nasdaq listing. In related news, embattled Focus Media (Nasdaq: FMCN), which previously came under attack from short sellers, has come under renewed attack from Muddy Waters, which this time is questioning the company’s purchase of a ginseng plantation. (English article) Focus tried to explain the acquisition by saying it was designed to acquire assets related to its core outdoor advertising business, but that didn’t convince investors, with Focus shares losing 5.4 percent on Friday. Perhaps this transaction is really related to Focus’ core business, as the company says; but the purchase looks a bit similar to one by online game company Giant Interactive (NYSE: GA) in the completely unrelated insurance space last year (previous post), and is symptomatic of the way that many US-listed Chinese companies are run like personal fiefdoms of their founders, who use their companies to play all kinds of investment and financial games. Expect to see more such delistings and short-seller attacks this year as the cleanup continues, though I would expect most activity to end by the middle of the year. In separate unrelated Internet news, Goldman Sachs has apparently begun shopping shares of Facebook to wealthy Chinese investors via a unit of financial services group Ping An in the run-up to Facebook’s highly anticipated IPO. (Chinese article) This kind of activity certainly isn’t that unusual, as Goldman is clearly trying to start creating buzz before the offering. What’s more interesting is that it’s seeking investors in China, providing the latest indication that Facebook still aims to enter the China market and could even make a move here soon to create more buzz for its offering expected in the next few months. Stay tuned.

Bottom line: The latest delisting and short-seller attack against US-listed Chinese firms indicate the cleanup of such companies on US markets will continue through at least the middle of this year.

Related postings 相关文章:

◙ Short Sellers Target China in Year End Assault 做空抛盘年底将矛头对准在美上市中国企业

◙ Rumor Mongers Seize on Crisis With Sina Attack

◙ Despite China Rebuff, Facebook Going Back for More Facebook明知山有虎，偏向虎山行

Lashou Ropes in Small Potatoes For US IPO 拉手网聘二流承销商赴美上市

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Turmoil and discord continue to plague the online group buying space, with industry leader Lashou taking a dubious step in its struggle to make an IPO before the market collapses by hiring a couple of second-tier investment banks to underwrite the offering. Reuters is reporting the company has hired leading Chinese investment bank CICC and top Japanese investment bank Nomura to lead the New York offering to raise $100-$200 million (Chinese article). The hire  comes after Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) abruptly resigned from the case last month due to concerns over accounting records at some of Lashou’s recent acquisitions, and after another leading group buying site, 55tuan, reportedly failed to find an underwriter for its planned IPO for similar reasons. (previous post) I applaud Lashou for its tenacity in making an IPO; but it’s also painfully apparent the company had to resort to CICC and Nomura after the first-tier US and European investment banks all shunned the deal. Neither CICC  nor Nomura has particularly strong ties to US investors, which means that Lashou’s IPO, if it really goes ahead, will face an uphill battle attracting investors to this offer from a sector in crisis. The turmoil first surfaced earlier this year when Gaopeng, the group buying joint venture between US group buying pioneer Groupon and Tencent (HKEx: 700) launched mass layoffs. Groupon.cn, a China competitor unrelated to US-based Groupon, has also reportedly laid off many employees (Chinese article); and 55tuan itself has also started some layoffs, though the company has denied gossipy reports that it was laying off up to 70 percent of its staff. (English article) A sector in so much turmoil will hardly be attractive to US investors, who are already wary of Chinese companies due to several recent high-profile accounting scandals. That said, and considering the weakness of Nomura and CICC in this space, I would look for Lashou’s IPO to price at the low end of its range and ultimately raise less than the minimum $100 million it is targeting, as investors avoid this highly problematic offering — if it even makes it to market at all.

Bottom line: Lashou’s upcoming New York IPO is likely to attract little or no investor demand due to weak underwriters and turmoil in China’s ultra-competition group buying space.

Related postings 相关文章:

◙ Lashou Begs for an IPO Banking Partner 拉手网拼命寻找上市承销商

◙ 55tuan Layoff Rumors Mark Latest Group Buying Distress Call 传窝窝团大裁员 团购业前景黯淡

◙ Group Buying Sites: The First to Fall? 团购网或将在互联网泡沫破灭时应声而倒？

55tuan Layoff Rumors Mark Latest Group Buying Distress Call 传窝窝团大裁员 团购业前景黯淡

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I’m usually reluctant to report on rumors, but a posting on Sina’s (Nasdaq: SINA) Weibo late yesterday that group buying giant 55tuan was launching massive layoffs seemed too big to ignore, reflecting troubles at both the company and in the money-losing group buying space. Sina itself followed up on the Weibo post by contacting the  poster, who reiterated that 55tuan had cut 22 of the 31 people in the local markets division where he works, or about 70 percent of the division. (Chinese article) I suspect we’ll see domestic media follow up on this rumor today, and clearly you can’t extrapolate big cuts in a small regional division to an entire company. But at the very least, assuming this worker is really from 55tuan, this kind of a big cut in a single division probably points to major adjustments being made at 55tuan, which in July had to abandon plans for a US IPO after several investment banks refused to handle the deal over concerns about accounting records at some of its recently acquired assets. (previous post) Rival Lashou, China’s biggest group buying site, was racing to find an investment bank for its own IPO earlier this month, after Goldman Sachs and Morgan Stanley reportedly resigned from the case over similar concerns. (previous post) Both 55tuan and Lashou raised $100 million or more earlier this year amid a boom in China’s group buying sector that resulted in fierce competition, drawing the field of money-losing players deeper into the red. The layoffs at 55tuan, if true, would be the most significant in the sector so far, following major cuts at Gaopeng, the group buying joint venture between US giant Groupon and China Internet leader Tencent (HKEx: 700) earlier this year. Investors look unlikely to pour more funds into these money-losing companies anytime soon, which means that unless they can raise money some other way most are likely to go into a “cash preservation” mode by implementing severe spending cuts including layoffs and reduced marketing activities. When that happens, look for a ripple effect to hit other web firms like Baidu (Nasdaq: BIDU) and Sina, that rely heavily on ad revenues for their income.

Bottom line: Rumors of layoffs at group buying site 55tuan, if true, would mark the most significant sign to date of distress in the overheated sector, which is poised for a major shake-up.

我通常不愿探讨传言，但昨晚新浪(SINA.O)微博上称窝窝团将大规模裁员，这则消息实在不容忽视，它反映了该公司以及整个团购行业面临的困境。新浪後来与微博作者取得联系，对方称其曾在窝窝团工作的部门大幅裁员。我估计今天国内媒体会就此追踪报导，当然我们不能基于一个部门的裁员来推测整个公司。但我们至少可以这麽想，若一个部门大幅裁员，可能意味着公司正进行重大调整。窝窝团此前曾打算赴美上市，後来因多家投行对其收购的一些资产的会计记录存在顾虑，拒绝接手其上市事宜，导致窝窝团7月放弃赴美上市。另一团购网站–拉手网本月早些时候也苦苦寻找投行安排上市事宜，此前摩根士丹利(MS.N)和高盛(GS.N)出于类似顾虑，退出拉手网上市案。今年早些时候，中国团购业如火如荼之际，窝窝团和拉手网均曾筹资至少1亿美元，但後来行业竞争加剧，团购网站亏损严重。如果窝窝团大幅裁员消息属实，则将是高朋网今年大规模裁员後，团购业最轰动事件。短期内投资者不太可能再向这些亏损公司投入更多资金，这意味着它们除非能有别的筹资渠道，否则就不得不保存现金，通过裁员和减少营销活动等途径削减支出。一旦出现这样的局面，势必波及百度(BIDU.O)和新浪等严重依赖广告收入的网络公司。

一句话：窝窝团裁员传言若属实，则是团购业陷入困境的最明确信号，意味着该行业将出现重大调整。

Related postings 相关文章:

◙ Lashou Begs for an IPO Banking Partner 拉手网拼命寻找上市承销商

◙ Group Buying Sites: The First to Fall? 团购网或将在互联网泡沫破灭时应声而倒？

◙ Gaopeng Lay-Offs Auger Ad Spending Downturn 1高朋裁员预示网络广告支出或大幅下降