Bottom line: Strong pricing for a large new bond from Car Inc reflects good potential for companies in China’s secondary car market, which should see strong growth as new car sales slow.
Car Inc raises $500 mln in bond offer
Let’s take a brief break from Internet companies to look at recently listed auto rental specialist Car Inc (HKEx: 699), which has excited the market with a new $500 million bond offering. Despite its earlier setbacks, including an aborted previous IPO, Car Inc has done quite well since its listing last September, as Chinese car-related plays find a strong audience among international investors. Interest seems especially strong toward car companies that target the second-hand market, as new car sales look set to slow sharply due to China’s slowing economy and restrictions being imposed by many cities to control pollution. Read Full Post…
Bottom line: China needs to accelerate the opening of its banking sector to foreign participation, or risk losing overseas expertise and investment dollars that could revitalize the sector.
BBVA sells down Citic Bank stake
Spain’s Banco Bilbao Vizcaya Argentaria (BBVA) became the latest major foreign bank to check out of China last week, when it sold off half of its stake in Citic Bank, a unit of one of the nation’s leading financial services groups. The move follows a similar series of sales by other major foreign financial firms over the last 5 years, depriving China’s state-run banks of valuable expertise they could have used as they make the transition from their past as policy lenders to more commercially-oriented institutions. Read Full Post…
Bottom line: New mega fund-raising by Citic and Galaxy Securities could presage a flurry of global buying in the year ahead as non-banking financial firms look to expand abroad.
Citic raises $10 billion
Massive new fund raising by 2 major Chinese financial firms is showing that these companies remain an attractive option for international investors, even as traditional banks have become a pariah due to their huge volumes of bad debt. The deals by financial conglomerate Citic Ltd (HKEx: 267) and Galaxy Securities (HKEx: 6881) will raise a collective $12.3 billion, and could also presage a new wave of global buying by fast-growing Chinese financial firms outside the nation’s traditional banks. Read Full Post…
Bottom line: The US, EU and other major countries are likely to block the merger of China’s 2 largest rolling stock producers on anti-competitive grounds, forcing Beijing to abandon the deal.
CNR-CSR merger to face western scrutiny
Beijing has become increasingly active in reviewing big global M&A for deals that affect China, but an interesting reversal is set to occur when western countries review a pending mega-merger between the nation’s 2 largest makers of railroad rolling stock. That review could put the west and China on a collision course, as the US and especially the European Union could both have strong cases for blocking the merger of CSR Corp and CNR Corp, which are already 2 of the world’s largest companies that manufacture high speed railroads and related equipment. Read Full Post…
Bottom line: Tencent’s inclusion in a national credit database initiative reflects the big commercial potential of WeChat, but a lawsuit over rumor spreading also highlights one of WeChat’s biggest liabilities.
Tencent joins credit card database drive
Two stories in the news are showing how WeChat is likely to become the future big bread-winner for Internet giant Tencent (HKEx: 700), even as the wildly popular mobile messaging service poses tricky liability risks for its parent. The first headlines spotlights WeChat’s huge potential, with reports that the central bank has invited Tencent to take part in development of a new national credit database. The latter news isn’t quite so upbeat, with a Shenzhen-listed drugmaker suing Tencent for failing to stop the spread of rumors about its products over WeChat. Read Full Post…
Bottom line: UnionPay will see its market share stagnate or even start to decline at home as it faces new competition in the next 3 years, while it’s likely to see sharp growth in its overseas expansion.
UnionPay faces new challenges at home
The coming year could be a groundbreaking one for the important but low-profile business of providing financial settlement services in China, now dominated by bank card issuer UnionPay. Such services allow banks and companies to transfer money back and forth between each other electronically, facilitating things like credit and debit card purchases and letting people withdraw cash from other banks’ ATMs besides their own.
While UnionPay has dominated the sector for domestic transaction settlement service for the last decade, its state-granted monopoly will officially end this year as China complies with a WTO ruling in response to complaints from global leaders MasterCard (NYSE: MA) and Visa (NYSE: V). At the same time, UnionPay is getting challenged by homegrown domestic players led by e-commerce giant Alibaba (NYSE: BABA), whose financial arm is also pushing into the business. 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…
Bottom line: Fosun’s purchase of Club Med looks like a good bet despite the deal’s big premium, and could be followed by a major Chinese expansion and new IPO in Hong Kong in the next 5 years.
Fosun wins Club Med bidding war
Normally I’m not a big fan of bidding wars since they tend to overinflate asset prices, but I’ll admit I was quite encouraged to read that Chinese private equity giant Fosun International (HKEx: 656) finally appears to have won a buyout battle for French resort operator Club Med (Paris: CU). My optimism is based on a number of factors, both financial and also on the strong future growth that Club Med could enjoy if and when the longest buyout in history for a Paris-traded company finally closes. Read Full Post…
Bottom line: Chinese brokerages are in a fund-raising frenzy to take advantage of strong market sentiment, but their shares could pull back sharply in the second half of next year if China’s stock market rally runs out of steam.
Guosen shares soar in trading debut
It’s hard to read the financial headlines these days without seeing a story about the massive recent rally in Chinese brokerage stocks, which is being fueled by several factors. The brokerages themselves haven’t been blind to the fact, and are racing to take advantage of the positive sentiment to raise big chunks of new cash. Now leading brokerage Citic Securities (HKEx: 6030; Shanghai: 600030) and mid-sized player Guosen (Shenzhen: 002736) have joined the binge, with new share issues that could end up collectively raising up to $6.5 billion. Read Full Post…
Bottom line: Wanda will face a steep uphill climb in electronic payments following its purchase of 99Bill, while UnionPay will continue to grow rapidly overseas as more Chinese travelers and businesses go abroad.
Wanda buys control of 99Bill
Two big news bits from the electronic payments space are in the headlines as we round out 2014, led by news of a major new acquisition by property giant Wanda Group just days after a Hong Kong IPO for its core shopping mall unit. The other new revolves around industry giant UnionPay, which has feasted on outbound Chinese tourist and business spending to pass larger global rivals MasterCard (NYSE: MA) and Visa (NYSE: V) for issuing credit cards in nearby South Korea. Read Full Post…
Bottom line: BBVA’s cut-back in its alliance with Citic represents the latest divorce between western banks and Chinese partners, with little new foreign investment likely in the sector for the next 2-3 years.
BBVA sells stake in Citic unit
A trend that’s been quiet for more than a year has popped back into the headlines, with word that Spain’s second largest bank has dumped its stake in a holding company tied to Chinese financial services conglomerate Citic Group. This particular deal is being driven by a number of factors, including a need for cash by Spain’s Banco Bilbao Vizcaya Argentaria SA (BBVA). But the bottom line is that BBVA and other major foreign banks have ended most of their similar alliances with Chinese partners over the last 3 years after such tie-ups failed to produce any strategic benefits. Read Full Post…
