Bottom line: Alibaba and Tencent are likely to find themselves in a growing number of clashes in the year ahead due to consolidation involving their investments at home and a limited number of opportunities abroad.
Alibaba, Tencent back rival Korean Internet banks
In what’s shaping up as a trend for the year ahead, Tencent(HKEx: 700) and Alibaba(NYSE: BABA) are clashing once again in a newly announced South Korean Internet bank initiative in which both of China’s top Internet companies have an interest. It may be slightly overstated to call this particular instance a clash, since stakes held by Alibaba-affiliated Ant Financial and Tencent in 2 newly formed Korean Internet banks are probably quite small, probably at 5 percent or less.
But the reality is that these 2 Internet titans are increasingly clashing in a growing number of instances, as each invests in a wide array of areas to expand beyond their core businesses both inside and out of China. Those investments have put the pair in awkward situations in 2 of China’s largest Internet M&A deals this year, one involving the formation of hired car services giant Didi Kuaidi, and the other in a newer deal that has Meituan and Dianping merging to form a new leader in the group buying space. Read Full Post…
Bottom line: Baidu’s new joint venture bank with Citic could help it catch up to stumbling private banks backed by Tencent and Alibaba, which are struggling due to restrictions on their operations by Beijing.
WeBank seeks new funding
Two headlines are highlighting the opportunities and challenges that private banking is presenting for China’s Internet giants. The larger of the news items has online search leader Baidu(Nasdaq: BIDU) forming a joint venture with traditional banking giant Citic Bank (HKEx: 998), as it plays catch-up with Internet rivals Tencent(HKEx: 700) and Alibaba(NYSE: BABA). The second headline involves Tencent’s recently formed WeBank online bank, which is reportedly looking to raise $1 billion nearly a year after its official launch.
China’s Internet companies have rushed into financial services over the last 2 years, as Beijing tries to breathe new life into a stodgy sector previously dominated by big state-run firms. Both Tencent and Alibaba have been at the forefront of the movement, with each getting licenses to open private banks earlier this year under a new pilot scheme. But the transition has been filled with obstacles, partly due to lack of regulation but also because of resistance from the traditional banks. Read Full Post…
Bottom line: Stiff restrictions on private investment in Chinese financial services will hobble a new insurance tie-up for Ant Financial, and were likely a big factor behind the resignation of the head of Tencent’s young WeBank.
WeBank chief resigns
China’s 2 largest Internet companies are in the headlines for major new moves in financial service, reflecting the rapidly evolving picture for this newer part of their business. Alibaba (NYSE: BABA) was in the headlines for more positive developments, as its affiliated Ant Financial unit announced a new insurance tie-up with Cathay Financial (Taipei: 2882), one of Taiwan’s leading financial services companies. The news was less upbeat for Tencent (HKEx: 700), with word that the head of its young WeBank was leaving just 9 months after the bank’s launch.
Both of these stories reflect the huge potential financial services hold for big private companies like Alibaba and Tencent, as Beijing opens the sector to private investment. But at the same time, the newness of the opening means that many rules are unclear and sometimes even contradictory. Tencent has learned that lesson quickly with WeBank, which has faced major limitations in its early days. Read Full Post…
The following press releases and media reports about Chinese companies were carried on September 11. To view a full article or story, click on the link next to the headline.
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Dell Says to Invest $125 Bln in China Over 5 Years (English article)
Lenovo (HKEx: 992) Starts OEM Smartphone Production for Other Brands – Report (Chinese article)
Mindray (NYSE: MR) Receives Revised Proposal to Acquire Company at $27 Per ADS (PRNewswire)
Didi Kuaidi Said to Join Alibaba, Tencent in Lyft Funding Deal (English article)
Tencent (HKEx: 700) WeBank Chief Cao Tong Resigns (Chinese article)
The following press releases and media reports about Chinese companies were carried on August 15-17. To view a full article or story, click on the link next to the headline.
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Soros Cuts Stakes in Internet Giants Alibaba (NYSE: BABA), Baidu (Nasdaq: BIDU) (English article)
Bottom line: Tencent WeBank’s rapid growth over the last 2 months shows it intends to focus on high-interest small loans aimed at consumers and small businesses, challenging credit cards and credit lines from traditional banks.
WeBank lends $130 mln in 2 months
Seven months after its launch, Tecent-backed (HKEx: 700) WeBank is showing off some of its first financial accomplishments that hint at the direction it may take as it carves out a place in China’s banking sector. The numbers reveals that the bank, the first to launch under a private-sector pilot program by Beijing, is setting its sights on providing credit to small businesses and consumers. The tack looks like a direct challenge to traditional credit card issuers, and could ultimately provide consumers with yet another payment option in both the online and offline worlds. Read Full Post…
Bottom line: Alibaba’s technical glitch at Alipay, the launch of its new bank and use of its Taobao platform to auction of bad loans reflect its growing clout in financial services, as it attempts to build up its Ant Financial unit for a future IPO.
Technical glitch interrupts Alipay
E-commerce leader Alibaba (NYSE: BABA) is in a trio of finance-related headlines, spotlighting its growing bet on financial services that could be a huge growth area as Beijing opens the sector to private investment. One headline has seen Alibaba get official permission from its home province to open a bank, after it became one of the first 3 entities to receive private banking licenses under a pilot program by Beijing.
The second headline has seen the company’s popular Alipay electronic payments service experience technical problems that cut off access for 2 hours earlier this week, prompting it to quickly say that no accounts were compromised. The final news bit comes in a larger story about China’s growing bad asset crisis, which will see the nation’s top bad asset management company use Alibaba’s Taobao marketplace to auction off some of those assets. Read Full Post…
Bottom line: The piracy scandal rocking Alibaba will blow over in a few weeks with minimal longer-term impact, though the company’s stock will enter a downturn over the next 6 months due to overvaluation.
Piracy scandal grows around Alibaba
This week could well go down as a turning point for high-flying e-commerce giant Alibaba (NYSE: BABA), whose growing war of words with a top government agency is quickly becoming a major scandal. The increasingly heated exchange has almost completely overshadowed the latest media reports that say Alibaba’s financial arm is preparing to launch a bank later this year. A separate company announcement indicates the bank will use an innovative credit rating system that draws on Alibaba’s huge volume of big data generated from the billions of transactions and other information exchanges that cross over its network. Read Full Post…
Bottom line: WeBank and other newly approved private lenders are likely to struggle to find an audience due to operational limitations and competition from state-run banks and gray-market institutions.
WeBank makes first loan in Shenzhen
Some have predicted that a new group of private banks could shake up China’s stodgy financial sector, though the first loan from the group doesn’t look all that threatening. That loan came over the weekend, when WeBank, which is backed by Internet giant Tencent (HKEx: 700), made its first loan since receiving its license late last year. (previous post) The loan was for a modest amount and went to a truck driver in the southern boomtown of Shenzhen where WeBank is based. It carried a relatively high interest rate of 7.5 percent, which is probably suitable for that risk level. (English article) Read Full Post…
The following press releases and media reports about Chinese companies were carried on January 6. To view a full article or story, click on the link next to the headline.
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Tencent-backed (HKEx: 700) WeBank Gets The Ball Rolling With First Loan (English article)
Wanda E-Commerce Initiative To Go Online In Fourth Quarter (Chinese article)
