Bottom line: Huawei’s strong revenue and profit growth for 2017 are coming largely on the back of its home China market, which should continue to boost the company as Beijing aggressively pushes upcoming 5G services.
Huawei finds land of plenty in hometown market
Telecoms giant Huaweiis in the headlines as the new week begins, with word that the company has rekindled its profit growth in its latest reporting year. Unlike other companies, Huawei isn’t publicly traded and thus isn’t required to release any financials, which always means we need to take their numbers with a slight grain of salt. But generally speaking the company does seem to be trying to report meaningful figures, at least based on past years when the results weren’t all that flattering.
This time around the results look good, at least the final ones for revenue and profit growth. But a closer look shows something that many of us know, namely that the company is heavily dependent on its home market for that relatively strong showing. Some of that is probably deserved, as Huawei has emerged as a maker of quality products for both its core networking equipment and also its newer smartphones, which count myself as one of their fans and owners. Read Full Post…
Bottom line: Hong Kong-listed “Red chip” stocks like Lenovo and China Telecom could eventually make secondary listings in China under a new CDR program, but will be forced to wait behind higher-profile Internet names like Alibaba.
‘Red chips’ eye China listings under CDR program
With all of the major IPOs for the week now in the history books, as most of the world takes a vacation for Good Friday, I thought I’d close out the week here in China with yet another angle on the China Depositary Receipt (CDR) program that is creating lots of buzz. Regular readers will know this is a reference to China’s planned take on the popular American Depositary Receipt (ADR) program that lets companies with a primary listing in one market make secondary listings in another one.
Lots has been written these last couple of weeks about how the CDR program could let U.S.- and Hong Kong-listed tech giants like Alibaba(NYSE: BABA) and Tencent(HKEx: 700) make new secondary listings in China, which they couldn’t do before. But today we’re getting the first few peeps about similar homecomings from top executives of a group of Hong Kong-listed companies known as “red chips”, which are major Chinese firms that are currently barred from listing at home. Read Full Post…
Bottom line: Bilibili and iQiyi are likely to price in the middle of their ranges and debut flat to up slightly when their IPO shares start trading this week in the US.
iQiyi, Bilibili set for weak debuts?
This week is shaping up as one of the busiest I can recall for New York IPOs by Chinese firms, with at least four major listings set to take place. The first of those sputtered out of the gate on Tuesday, with hotel operator Greentree (NYSE: GHG) dropping 7 percent in its trading debut after pricing weakly and slashing the size of its offering. That less-than-stellar showing comes just days after another non-tech offering fizzled with the new listing of education specialist Sunlands (NYSE: STG) late last week.
Those weak signals could bode poorly for the three more IPOs set to take place later this week, including a launch for online video sites Bilibili and iQiyi on Wednesday and Thursday, the latter of which could raise more than $2 billion. In between that pair will be another education firm, OneSmart, which is set to debut on Wednesday. Read Full Post…
Bottom line: Apple’s Tim Cook and other big global CEOs active in China will need to walk a fine line to avoid being forced to take sides in ongoing US-China trade frictions.
Apple CEO Cook talks US-China tensions on latest China trip
Apple(Nasdaq: AAPL) CEO Tim Cook was in China once again this past weekend, in what seems to be becoming his second home. This time around Cook was one of the few corporate chiefs attending the China Development Forum, a major annual conference sponsored by China’s State Council. The event is mostly peopled by academics and government officials, and thus Cook’s attendance is both a feather in Beijing’s cap and also something of a nod to Cook’s own status as a global high-tech titan as he tries to stay in the nation’s good graces.
His major proclamations at the event weren’t all that earth-shattering. But he inevitably felt compelled to comment on the Donald Trump administration’s announcement last week of new punitive tariffs on China for unfair trade practices. He didn’t venture too far into the matter, and mostly urged both sides to stay calm in the face of rising trade tensions between the world’s two largest economies. Read Full Post…
Bottom line: iQiyi and Bilibili should price near the top of their higher IPO price ranges, as each benefits from strong investor sentiment fueled by their unique offerings and a potential new plan to concurrently list their shares in China.
iQiyi, Bilibili capitlize on strong positions in video
Anyone who was worried that a regulatory crackdown on fintechs late last year might dampen broader enthusiasm for Chinese stocks can relax. That’s my key takeaway from the latest headlines, which show that two non-fintech Internet firms are experiencing stronger-than-expected demand for their upcoming listings in New York.
Leading that charge is Baidu-backed (Nasdaq: BIDU) online video site iQiyi, which has sharply jacked up the fund-raising target for its proposed New York listing by a massive 80 percent, in what could well be the biggest such listing by a Chinese firm this year. At the same time, the smaller but similarly high-profile Bilibili has jacked up its own fund-raising target by a hefty 50 percent. Read Full Post…
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…
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…
Bottom line: Didi’s foray into takeout delivery and Meituan’s into private car services look like moves of desperation to make the companies more attractive as they get pressured to make IPOs by the end of next year.
Meituan eyes car services
Two of China’s biggest unlisted internet companies are in the headlines as the week winds down, each taking a shot at the other’s turf. One headline has the Uber-like Didi Chuxing hiring in preparation to launch a takeout dining service like the one operated by Meituan-Dianping. The other has Meituan-Dianping preparing to roll out its own private car services in seven Chinese cities, taking a direct shot at Didi.
The timing of these two news bits is probably coincidental, since I doubt they share information on their strategic planning. What’s more, the Meituan move into car services is just an extension of previous earlier news. From a bigger perspective, both items smack just slightly of desperation as these two companies look for growth in the face of stagnating core businesses. Read Full Post…
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.
Alibaba salivates at Ele.me
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…
Bottom line: New listing plans by education firm Redlands and steel-trading platform Zhaogang point to lower-tech offshore IPOs taking center stage in the first half of the year until the situation for fintech candidates stabilizes.
Redlands sees riches in professional education
With fintech offerings in a holding pattern, a stream of lower-tech IPOs are finding their way to market in the first few months of this year. The latest of those is education company Redlands, which has just filed to sell up to $300 million worth of stock in a New York listing. At the same time another lower-tech offering, a steel-trading platform called Zhaogang, is also in the headlines, with media reporting it is gearing up for a Hong Kong listing that could raise up to $500 million.
It’s hard to spot a trend from just two offerings, but these deals do have a particularly low-tech bent to them. That’s probably at least partly because many of the higher-tech offerings in the current market, which were coming from financial technology firms, or fintech, are on hold at the moment due to regulatory uncertainty. That said, education does seem to be a flavor of the moment, at least in part because many of the companies going to market have found ways to quickly scale-up their business using online models. Read Full Post…
Bottom line: Two new vetoes for Chinese purchases of US microchip and financial companies are the latest signals the Donald Trump administration intends to use such vetoes to fight for a more balanced trade relationship.
Washington vetoes 2 more Chinese U.S. purchases
What started as a trickle of dying cross-border deals involving Chinese buyers of US assets is showing signs of becoming a flood, with two new vetoes hitting the headlines. The latest of those is from the all-too-familiar high-tech chip sector, and has US chip maker Xcerra (Nasdaq: XCRA) saying it is scrapping its plan to be purchased by a Chinese buyer after failing to win clearance from the US national security reviewer. In a related vein, the Chicago Stock Exchange earlier this week scrapped a similar deal due to objections from the US stock regulator.
This pair of collapses extends a recent string of similar developments that actually dates back to the Obama administration. But the pace is clearly picking up under current President Donald Trump, who has made no secret of the fact that he wants to see a more level playing field in US-China trade relations. Whether or not these deals represent a real security risk is open to interpretation. But regardless, Trump is making it clear he will use this pretext to block deals in the sensitive financial and high-tech sectors. Read Full Post…
