The following press releases and news reports about China companies were carried on August 31. To view a full article or story, click on the link next to the headline.
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China’s Big Banks Set for Hard Slog as Margins Shrink (English article)
Midea (Shenzhen: 000333) H1 Profit up 13 Pct, Gets US Clearance for Kuka Buy (Chinese article)
Bottom line: The collapse of a cross-investment between China’s Citic Bank and Taiwan’s CTBC Financial reflects growing cross-strait tensions, and could signal a chill in major new cross-strait investments over the next 4 years.
Citic Bank scraps Taiwan investment
In a troubling sign for companies doing business across the Taiwan Strait, an equity swap between China’s Citic Bank (Shanghai: 601988) and Taiwanese peer CTBC Financial (HKEx: 2891) has collapsed due to regulatory issues. In this case it appears that Taiwan scuttled the deal for reasons I’ll explain shortly, though a Citic spokesman emphasized no politics were involved. But regardless of the stated reasons, this particular development seems to reflect growing tensions between Taiwan and China under a new Taiwanese administration that’s far more wary of Beijing than its predecessor. Read Full Post…
Bottom line: Goldman’s bet on Minsheng Bank could auger a new wave of foreign investment in depressed Chinese bank shares, on belief that Beijing will rescue the group before their bad debt becomes too heavy.
Goldman invests in Minsheng
After dumping shares of major Chinese lenders in droves after the global financial crisis, at least one major foreign investor is testing the waters again, with word that Goldman Sachs (NYSE: GS) has quietly built up a large stake in Minsheng Bank (HKEx: 1988; Shanghai: 600016). But this time Goldman’s move, which has seen it quietly buy 11 percent of Minsheng’s Hong Kong-listed shares, looks likely a pure investment play rather than a strategic tie-up. Read Full Post…
Bottom line: HNA’s Virgin Australia investment reflects its aspirations to build a global travel empire, while ICBC’s new European infrastructure fund reflects its attempts to be commercial while also supporting central government initiatives.
HNA invests in Virgin Australia
A couple of headlines are spotlighting the different approaches of 2 of China’s leading global investors, led by a big new investment in airline Virgin Australia (Sydney: VBA) by HNA Group. On the other side of the globe, ICBC (HKEx: 1398; Shanghai: 601398) is establishing a major new European infrastructure fund, in what looks like a far more politically-motivated move by China’s leading lender. Both investments reflect China’s growing role on the global investing stage, though each represents the rapidly diverging priorities between the state-run and private sectors. Read Full Post…
Bottom line: UnionPay’s move into the dollar-denominated US credit card market looks smart strategically, but is likely to fail due to clumsy execution and fierce competition from Visa and MasterCard.
UnionPay issues first US credit cards
Watch out, Visa (NYSE: V) and MasterCard (NYSE: MA). China’s UnionPay is taking on this global pair of credit card giants on their home turf, with word that the Chinese company will launch its first US-based card in partnership with ICBC (NYSE: 1398; Shanghai: 601398), China’s biggest bank.
Of course I’m being just a bit facetious here, since UnionPay’s first-ever US credit card will have to overcome huge obstacles to ever become a serious rival to local cards from Visa, MasterCard or American Express (NYSE: AXP). But I have to at least commend UnionPay for taking the offensive, since it’s likely to face a major assault on its own home turf later this year when Beijing finally opens the Chinese credit card market to foreigners. Read Full Post…
Anyone who has followed this series on my favorite Chinese stocks knows that all of my picks so far have come from the private sector, and that I’m generally not a fan of big state-owned enterprises (SOEs). But given the huge weight that SOEs carry in China’s economy and their preferential status in many key sectors, I feel obliged to recommend at least one such company in this series.
With that background in mind, my top pick among this group is the Hong Kong-listed Citic Ltd (HKEx: 267), one of China’s oldest conglomerates and a company often considered one of the nation’s most entrepreneurial SOEs. I particularly like Citic for its financial services focus, which includes its private equity arm, a bank and China’s leading brokerage, all of which are more commercially driven than many of China’s other big financial companies. Read Full Post…
The following press releases and news reports about China companies were carried on April 28. To view a full article or story, click on the link next to the headline.
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Apple (Nasdaq: AAPL) Stumbles in China as Local Phone Makers Head Up-Market (English article)
ICBC (HKEx: 1398) Launches First Chinese Credit Cards in US with UnionPay (English article)
Alibaba-Disney (NYSE: DIS) Partnership Is Frozen in China After Just 5 Months (English article)
Movie Ticket Booking Platform Weiying Shidai Wins 3 Bln Yuan Series C+ Funding (English article)
Yintech (Nasdaq: YIN) Falls Flat in US Debut as Chinese Peers Seek De-listing (English article)
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…
The following press releases and news reports about China companies were carried on March 31. To view a full article or story, click on the link next to the headline.
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Zheshang, Tianjin Banks Underwhelm in Hong Kong Debut (English article)
Midea (Shenzhen: 000333) Pays 53.7 Bln Yen for 80.1 Pct of Toshiba’s Appliance Unit (Chinese article)
ICBC (HKEx: 1398) Reports Annual Results for 2015 (HKEx announcement)
Bottom line: A new Beijing bailout allowing banks to swap bad loans for shares of defaulting borrowers will only prolong China’s ballooning bad loan crisis, saddling lenders with shares of poorly run companies.
Beijing prepares new bank bailout plan
Exactly how many times can Beijing rescue the country’s ailing banks? The answer to that question appears to be “at least one more time”, and most likely quite a few more in the next few years. That’s my latest assessment on reading new reports that Beijing is finalizing yet another plan to relieve the burden of ballooning bad debt weighing on most of the nation’s banks.
I’ll discuss the latest rescue plan shortly, and also add why this particular plan is one of the least attractive I’ve seen so far. But before that, I should use this occasion to say once more how this move shows why Chinese banks aren’t a very good investment. Put simply, most of China’s banks still behave more like policy lenders than real commercial banks, making loans based on directives from Beijing and local government officials. Read Full Post…
Bottom line: Foreign investors will give China bank IPOs a cold shoulder for the rest of this year due to concerns of a bad debt crisis, potentially driving valuations even lower than their already depressed levels.
Zheshang Bank delays IPO plan
A couple of banking stories are spotlighting the rapidly fading attraction of Chinese lenders to foreign investors, who fear the banks are standing on the cusp of a bad loan crisis fueled by China’s cooling economy. The first item has Citigroup (NYSE: C) selling its 20 percent stake in China Guangfa Bank for $3 billion, after original plans to list the bank collapsed due to lack of investor interest. The second item has China Zheshang Bank also delaying plans for a $1 billion Hong Kong IPO for similar reasons.
Both developments come as Chinese banks listed in Hong Kong now trade at extremely low multiples due to concerns about their individual health and China’s broader economic slowdown. Leading lender ICBC (HKEx: 1398; Shanghai: 601398) now trades at a paltry price-to-earnings (PE) multiple of just 5, while Bank of China (HKEx: 3988; Shanghai: 601398) trades at an even lower 3.8. Read Full Post…
