Bottom line: Orient Securities IPO should price and debut strongly on strong sentiment towards brokerages, which should perform well over the short- to medium-term if China’s broader economy continues to slow.
Orient Securities IPO draws strong interest
Despite new uncertainties about their future, Chinese brokerages continue to remain a hot ticket as investors bet they’ll benefit from a booming domestic stock market and new business from a pilot program allowing more foreigners to buy Chinese stocks. That’s my assessment following word that the biggest domestic IPO since 2011, from Orient Securities, has been massively oversubscribed by a factor of more than 90. Put another way, some $150 billion worth of investor money is chasing the $1.6 billion offering, meaning barely 1 in 10 investors will be able to get any shares. Read Full Post…
Bottom line: Beijing needs to roll out new rules allowing limited foreign investment in sensitive areas or risk seeing private companies like Ant Financial suffer from slower growth and artificially low valuations.
foreign investment bans need new approach
Alibaba-affiliated (NYSE: BABA) Ant Financial has been on a financial roller coaster ride over the past month, as it tries to raise billions of dollar to fund its growth en route to an IPO that will offer Chinese investors one of their first plays into the private banking sector. Some reports have said the new funding could value Ant, whose largest asset is the Alipay electronic payments service, at up to $50 billion. But others have put the figure as low as $30 billion, reflecting the intense negotiations taking place. Read Full Post…
Bottom line: Ant Financial is likely to get a low valuation from its new private placement due to the exclusion of foreign investors, but could see the figure reach up to $70 billion by the time of its 2017 IPO if it can rapidly build up its new services.
SOEs squeeze Ant Financial’s valuation
Yet another report has come out about an ongoing private placement by Ant Financial, saying the financial services affiliate of e-commerce giant Alibaba (NYSE: BABA) is now planning a domestic IPO in 2017. That’s a little later than was indicated in previous reports, which were probably a little too optimistic about a company whose various businesses are mostly less than 2 years old.
But the more interesting element in this recent flurry of reports has been what valuation the new private placement will bring for Ant, which is financially separate from the New York-listed Alibaba. Some of the earlier reports indicated Ant could be valued at up to $50 billion, which admittedly looks quite optimistic for a firm at its stage of development. But now the latest reports are bringing the number down sharply, saying the new funding will value Ant at between $35 billion and $40 billion. Read Full Post…
Bottom line: A mega IPO by Postal Savings Bank next year is likely to attract little or no interest from private investors, while an upcoming IPO by 55Tuan could do slightly better but will still get only a lukewarm reception.
55Tun misses pricing target date
A couple of unattractive IPOs are in the headlines as China gets back to work after the Lunar New Year holiday, led by a massive plan by China’s Postal Savings Bank to raise up to $25 billion as soon as next year. While that plan may be a year or more away, a more advanced listing by group-buying site 55Tuan has failed to price its shares by a previously announced target date, leading some to speculate that the deal is running into trouble. Neither of these deals looks very exciting to me, and I suspect they won’t attract much interest from private investors either. Read Full Post…
Bottom line: Washington’s approval of the purchase of the Waldorf Astoria hotel by a Chinese insurer indicates a wave of similar real estate buying by Chinese investors will accelerate, resulting in a bubble likely to burst over the next decade.
Anbang closes Waldorf buy
Washington has just sent an important signal that it won’t seek to halt the growing tide of Chinese investment in US real estate, with word that Anbang Insurance has just closed its purchase of New York’s storied Waldorf Astoria hotel for nearly $2 billion. I was quite surprised at how quickly this deal closed, since the amount of money is huge and the deal itself also sparked some controversy over potential national security issues. More precisely, it took just over 4 months to close the purchase of one of the world’s most famous hotels at a record-setting price. Read Full Post…
Bottom line: Chinese brokerages will embark on a buying binge for targets in Hong Kong and debt-strapped European countries, with as many as 3 or 4 more deals likely this year after Everbright’s purchase of SHK Financial.
Everbright buys HK brokerage
Everbright Securities (Shanghai: 601788) is joining the list of Chinese brokerages that have suddenly become quite acquisitive, with word that it will buy the brokerage arm of Hong Kong real estate giant Sun Hung Kai (HKEx: 16). Everbright’s move comes amid a flurry of other activity that has seen Chinese brokerages forge new tie-ups and raise big funds for M&A as they seek to expand abroad. Hong Kong looks set to emerge as one of the most popular targets for new tie-ups, thanks to its status as a crossroads between the Chinese and international investment communities. Read Full Post…
Bottom line: SAIC’s foray with GM into Indonesia could stand a moderate chance of success, while BYD’s new auto financing joint venture is unlikely to provide a major boost for its stalling EV campaign.
BYD gets approved for auto finance JV
Two of China’s more innovative automakers are in the headlines today, making interesting moves as each looks to maintain growth as the domestic car market sputters. One move will see domestic leader SAIC (Shanghai: 600104) make a new attempt to move outside China with plans to open an Indonesian factory with US joint venture partner General Motors (NYSE: GM). The second move has the sputtering BYD (HKEx: 1211; Shenzhen: 002594) getting government approval to launch a vehicle finance joint venture, which could potentially help to jump-start its stalling electric vehicle (EV) program. Read Full Post…
Bottom line: Alibaba’s Ant Financial unit is likely to get a strong valuation with a planned new private placement, and will embark on a series of high-profile moves before making a multibilllion-dollar IPO next year.
Ant Financial eyes 2016 IPO
Alibaba’s (NYSE: BABA) high-profile spat with Beijing is finally starting to subside, paving the way for the company’s affiliated financial unit, Ant Financial, to move into the headlines with word of plans for a major new fund-raising. But anyone holding Alibaba stock shouldn’t get too excited about Ant, which is separate from the listed company and whose rapid rise will only benefit Alibaba founder Jack Ma.
At the same time, other media reports are saying that Internet giant Tencent (HKEx: 700) has formally cleansed its popular WeChat mobile messaging platform of a holiday red-envelope feature from Alipay, Ant Financial’s most valuable asset. That development isn’t a surprise, but it does spotlight one of several major challenges that Ant will face as it tries to carve out a profitable place for itself in China’s fast-evolving financial services sector. Read Full Post…
Bottom line: 55Tuan’s increased IPO target and a major new funding round for online financial site Juzi Licai show investor interest remains high in Chinese Internet firms, though it could taper off in the second half of the year.
Juzi Licai wins $100 mln in funding
You know the market is still hot for China Internet companies when when money losers can boost the size of their IPOs, and start-ups can raise $100 million or more. That’s exactly what’s happening, with word that loss-making 55Tuan has boosted its IPO fund-raising target by more than 50 percent, as it seeks to become China’s first listed group buying site. At the same time, other media reports say Juzi Licai, an online financial site, has just raised a nifty $100 million in its second round of funding just 6 months after the launch of its core product. Read Full Post…
Bottom line: Bank of China’s Hong Kong arm is likely to find limited interest in a sale of its Nanyang Commercial Bank unit, as a slowing Chinese economy cools offshore interest in buying Hong Kong banks.
Bank of China looks to sell Nanyang Bank
A new report about a potential major bank sale in Hong Kong made me realize that a widely expected rush to buy locally based lenders in the former British colony never materialized. This latest report that the Hong Kong unit of Bank of China (HKEx: 3988; Shanghai: 601398) is shopping its locally-based Nanyang Commercial Bank might rekindle speculation that a flurry of new sales is coming. But the potential buyers mentioned in the report make such a gold rush look unlikely, indicating local Hong Kong banks may be losing their appeal as acquisition targets for Chinese and other global lenders. Read Full Post…
Bottom line: Foreign technology suppliers will complain about new requirements for them to reveal source codes to Beijing for selling to Chinese banks, but will ultimately comply over fears of being shut out of the market.
Beijing to force new security rules on foreign tech
China’s sudden obsession with national security risks posed by foreign technology has taken yet another step forward, with word that Beijing is preparing to place yet more restrictions on foreign firms that supply networking products and services to Chinese banks. As a longtime industry watcher, I need to quickly add my own view that this particular move isn’t really discriminatory against firms like IBM (NYSE: IBM), Cisco (Nasdaq: CSCO) and Hewlett-Packard (NYSE: HPQ), which are likely to feel the biggest effects. Read Full Post…
