Bottom line: The acceptance by Gree’s chairman of a surprise shareholder rejection over a controversial investment, and a muted sell-off in response to a short-seller attack on Huishan Dairy both signal growing maturity by Chinese stock investors.
China stock investors grow up
A couple of stock stories in the headlines as the new week begins are spotlighting a nascent but encouraging sophistication of shareholders in Chinese-listed companies. Such investors are traditionally famous for a sheep-like mentality that sees them blindly pile into and out of stocks based on rumors, heard-on-the-street advice or even simply a name change, with little regard for reality about the company’s business prospects.
But perhaps these latest two incidents show a growing sophistication that could bring some much-needed stability to Chinese stocks, which are famous for their volatility. Leading the headlines is word that the chairman of home appliance giant Gree (Shenzhen: 000651) has accepted a recent rejection by shareholders over a controversial investment plan in an electric car company. At the same time, shareholders of Huishan Dairy (HKEx: 6863) have largely ignored a new report by notorious short-seller Muddy Waters, in contrast to earlier times when such an attack might have sparked a sheep-like panic causing the company’s shares to plunge. Read Full Post…
Bottom line: Wanda’s first major made-for-China sporting event, a bicycle tour of scenic Guangxi province, looks like a well-conceived initiative that could auger well for its longer-term effort to tap the Chinese sports market.
Wanda launch Guangxi cycling event
Following its opening of several massive theme parks across China, entertainment aspirant Wanda Group has just announced the launch of what it hopes will become one of the nation’s premier sporting events that can earn a place on the global bicycling map. That announcement has Wanda pedaling its new Tour of Guangxi event, which will take cyclists through one of China’s most scenic provinces that includes the famous craggy mountains surrounding the city of Guilin. Read Full Post…
Bottom line: Gree’s new largess to employees with an across-the-board raise is an attempt to win back public good will, following setbacks for chief executive Dong Mingzhu in her attempt to defy shareholder wishes.
Gree’s Dong Mingzhu offers Christmas largess
I don’t usually write about Gree (Shenzhen: 000651), but an unusual storm of controversy around the home appliance maker nicely summarizes several tendencies that make Chinese companies both entertaining but also frustrating for westerners like myself to observe. The company’s main claims to fame are its air conditioners, and also its colorful chief executive Dong Mingzhu, who is often called China’s most powerful businesswoman.
Dong was doing a bit of goodwill hunting in the latest headlines, with word that Gree has decided to boost wages for all of its 70,000 employees by a 1,000 yuan ($145) each per month, a relatively large figure that probably equates to raises of 10 percent or more. The bigger subtext is that this raise comes after a series of personal setbacks for Dong, making the move look like her attempt to win back public approval and restore confidence in her leadership. Read Full Post…
The following press releases and news reports about China companies were carried on September 3-5. To view a full article or story, click on the link next to the headline.
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China Opens Antitrust Investigation Into Uber’s Deal with Didi (English article)
Yum (NYSE: YUM) to Sell Stake in China Unit to Ant, Primavera Ahead of Spinoff (English article)
The following press releases and news reports about China companies were carried on August 19. To view a full article or story, click on the link next to the headline.
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Momo (Nasdaq: MOMO) Announces Withdrawal of Privatization Offer (GlobeNewswire)
Lei Jun Resigns as YY (Nasdaq: YY) Chairman to Focus on Xiaomi Revival (Chinese article)
The following press releases and news reports about China companies were carried on May 12. To view a full article or story, click on the link next to the headline.
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PPTV Posts Farewell Microblog Message, Website Remains Active (Chinese article)
Canadian Solar (Nasdaq: CSIQ) Reports Q1 Results, Raises Annual Revenue Guidance (PRNewswire)
Wanda Group Reconsiders De-Listing Property Unit: Sources (English article)
LeEco (Shenzhen: 300104) Joins Forces with Twitter for Global Brand Expansion (Businesswire)
Bottom line: Midea could buy another global brand following its purchase of Toshiba’s home appliance business, while hometown rival Gree will also feel pressure to make a small to mid-sized overseas acquisition in the next 1-2 years.
Midea in MOU for Toshiba’s appliance unit
Following several days of rumors, struggling Japanese tech giant Toshiba (Tokyo: 6502) has confirmed it will sell a controlling stake in its home appliance business to Midea (Shenzhen: 000333), extending a fledgling movement by Chinese buyers abroad. The move could pressure other Chinese rivals, most notably Gree (Shenzhen: 000651), to follow in the footsteps of Midea and Haier (HKEx: 1169), which is also in the process of buying General Electric’s (NYSE: GE) appliance business.
From a bigger perspective, this particular trend looks a bit like what happened several decades ago in the older industry for TV sets. That trend saw Asian buyers purchase big western brands in the fading TV industry, with storied names like Zenith and RCA ultimately get gobbled up. Fast forward to the present, when most of those older brands no longer exist or are insignificant, which could hint at what may lie ahead for these new purchases by the Chinese companies. Read Full Post…
The following press releases and news reports about Chinese companies were carried on March 1. To view a full article or story, click on the link next to the headline.
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US Lawmakers Urge Caution on Potential Chinese Deal to Buy US Crane Maker (English article)
Citi (NYSE: C) to Sell Stake in China Guangfa Bank (Businesswire)
SAPPRFT to Strengthen Supervision of Online Video Series (English article)
Gree (Shenzhen: 000651) Products to Return to Suning (Shenzhen: 002024) Stores (Chinese article)
Alibaba (NYSE: BABA) Joined by Ma, Tsai for $500 Mln Stock Purchase (English article)
Bottom line: Beijing should note the latest trouble signal from ZTE in the smartphone sector, and take steps to prevent future similar boom-bust cycles by encouraging more responsible investing incentives by local governments.
ZTE cautious on China smartphone market
The latest trouble signal from China’s overheated smartphone sector came last week from telecoms stalwart ZTE (HKEx: 763; Shenzhen: 000063), which said it would remain cautious in the world’s largest market even as it announced ambitious new sales targets for the rest of the world this year. The company’s relative caution in its own home market comes amid a looming shakeout that is just the latest in a series of boom-bust cycles that have become all too common in China’s business landscape in the last 3 decades.
While market forces play a large role in these bubbles, regional governments looking to spur economic growth may also share some responsibility by offering incentives that encourage local firms to enter unfamiliar areas where the chance of failure is high. Such failures often result in big financial losses and mass layoffs, negating any economic benefit they were supposed to create. Read Full Post…
Bottom line: The failure of 2 major touch-screen technology manufacturers in Guangdong is the latest sign of trouble in China’s overheated smartphone sector, with similar new closures likely to accelerate in the next few months.
Two more smartphone component suppliers go bust
China’s smartphone wars are taking an unexpected twist, with suppliers to some of the nation’s top brands emerging as the first victims of a prolonged battle for market share. I had previously expected at least one or two small- to mid-sized brands would bow out of the market by the end of this year, though we have yet to see any such developments.
Instead the inevitable shake-out appears to be starting in the supply chain, with media reporting that 2 major smartphone part suppliers have gone bankrupt in southern Guangdong province where much of the manufacturing takes place. (Chinese article) The insolvency of these 2 major suppliers, one in the boomtown of Shenzhen and another in the nearby city of Huizhou, comes just a couple of weeks after the bankruptcy of a major supplier of metal casings for smartphones sold by Huawei and ZTE (HKEx: 763; Shenzhen: 000063). Read Full Post…
Bottom line: A new Pepsi-branded smartphone set to launch in China next week could get an initial boost from strong publicity, but will quickly fizzle due to lack of special features to distinguish it from others in the crowded market.
Pepsi phone coming to China
An entertaining new twist to China’s overheated smartphone story is coming from the soft drink sector, with word that global beverage giant Pepsi (NYSE: PEP) is preparing to enter a crowded space that hardly needs any new entrants. The headline looked somewhat strange to me, though nothing surprises me these days in a market where names like industrial equipment supplier Sany (Shanghai: 600031) and air conditioner maker Gree (Shenzhen: 000651) have all jumped on the smartphone bandwagon.
Such a bandwagon approach is quite typical for China, where local companies are always quick to join the latest trends even if they have little or no experience in the business. But foreign names are usually a little more savvy, and this particular instance was the first I could recall of a major foreign brand joining this kind of silly herd mentality that often ends in failure and big losses for the associated company. Read Full Post…
