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: 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: 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…
Bottom line: Xiaomi’s taking of the India smartphone crown and attendance at a major trade show next week are aimed at boosting its profile in the run-up to its IPO.
Xiaomi to attend MWC
Hype is building in the run-up to what’s likely to be one of the largest high-tech IPOs this year, with word that smartphone maker Xiaomi has snatched the India crown from a fading Samsung (Seoul: 005930) and is also making its first visit to the world’s top telecoms trade show next week. Both events are important milestones for a resurgent Xiaomi, as it attempts to boost its profile for a public listing that’s likely to raise in the neighborhood of $10 billion in Hong Kong.
At the same time, the list of attendees for this year’s Mobile World Congress taking place next week in Spain is also notable for a number of brands that have purchased booths in the past but aren’t doing so this year. Leading that list is Oppo, which briefly took the China smartphone crown last year from current leader Huawei. Also absent from the list are past attendees including Meizu and Gionee. That probably speaks to the fact that some of these brands are feeling the squeeze of prolonged competition in the space, and are choosing to spend their limited marketing budgets elsewhere. Read Full Post…
Bottom line: A relatively solid debut for wristband maker Huami bodes well for offshore Chinese IPOs outside the financial services sector, including for smartphone giant Xiaomi.
High-tech wristband maker Huami posts modest gain in debut
Different people are putting different spins on the trading debut for the first major Chinese IPO in New York this year, for a company called Huami, which makes fitness trackers and rose 2.3 percent on its first day. From my perspective, this looks like a gravity-defying debut, since the broader market tanked on that same day, with most of the major indexes down around 4 percent in the week’s second major major sell-off.
From a broader perspective, this seems to bode well for offshore Chinese IPOs in the year ahead, at least for those that are in safer sectors like this. Companies from the more volatile fintech sector, which has been the subject of repeated regulation to rein in the sector, could be in for a tougher ride. But this kind of more consumer-related product, which is far less controversial, could enjoy some success on positive sentiment about the broader China consumer market. Read Full Post…
Bottom line: Huawei’s latest big financial commitment to the UK is mostly for show, but Britain could still emerge as a winner over the longer term if Huawei conducts more R&D work in its British labs.
Huawei gives $4.2 billion gift to UK
After getting the cold shoulder from the US for its smartphones, telecoms superstar Huaweiis turning increasingly to Europe, and specifically to Britain, for consolation. That’s the key takeaway from the latest reports that say Huawei has told British Prime Minister Theresa May that it will spend a further 3 billion pounds ($4.2 billion) on procurement from the UK on top of its other commitments to the country. (English article)
This particular move seems mostly political, and also it’s questionable how significant it is. Huawei made its commitment last week during a trip by Theresa May to China, and this kind of mega-commitment is quite common during these meetings between Chinese and global leaders. The fact of the matter is that Huawei posted 600 billion yuan ($97 billion) in sales last year, meaning it had to spend perhaps half of that amount, or around $50 billion, on procurement of various components for its core networking equipment and smartphones. Read Full Post…
Bottom line: Google has quietly resumed updates of its China mapping service in a bid to tap the booming local market for location-based services.
Google resumes China mapping updates
Are they or aren’t they? That’s the question going through everyone’s minds these days about Google’s(Nasdaq: GOOG) stealth return to China, following reports that the company has quietly re-launched its previously dormant mapping service in the market. In this case there are quite a few conflicting signals, including the one coming from Google itself, which says nothing has changed with its mapping service.
I was a bit surprised at Google’s definitive statement, since I can say with certainty that the company has indeed resumed updating its popular mapping service following a dormant period of at least a few years after shuttering its China-based search service in 2010. Last year there was similar word that Google’s map site had resumed service in China, and I went and checked the URL at the time. Read Full Post…
Bottom line: Huawei’s decision to go ahead with a US market entry for its latest high-end phone, despite collapse of a tie-up with AT&T, is likely to produce very limited results due to lack of a carrier partner.
Huawei goes solo into US
If you can’t get a serious business partner, at least get a pretty face. That seems to be the message coming from a frustrated Huawei, which has announced it has signed on “Wonder Woman” star and model Gal Gadot as chief experience officer as it prepares to enter the US. This somewhat frivolous move was most likely part of a bigger announcement the company hoped to make for a grander entry to the US in partnership with corporate partner AT&T (NYSE: T).
But as many market watchers may already know, the AT&T deal reportedly collapsed at the last moment for unexplained reasons. The new tie-ups were all set to be unveiled at the Consumer Electronics Show (CES) taking place this week in Las Vegas. While the show went on and Huawei announced plans to release a version of its high-end Mate 10 in the US, with Gadot as product spokeswoman, the AT&T announcement never came. Read Full Post…
Bottom line: LeEco’s sell-down of its Coolpad stake is a prelude to disposal of the remainder, and could presage a sale of Coolpad to another smartphone maker later this year.
LeEco sells down Coolpad stake
The unraveling of former online video superstar LeEco(Shenzhen: 300104) continues as we head into the new week, with word the company has sold off a significant chunk of its stake in struggling smartphone maker Coolpad (HKEx: 2369) for a fraction of what it paid. This particular news is significant for a number of reasons, only one of which involves the latest attempt to salvage LeEco. It also has large implications for the future survival of Coolpad, and China’s broader smartphone industry. Some have predicted 2018 will be the year this overcrowded industry finally sees a weed-out that is long overdue.
I and many others have predicted this particular sale for a while, so the actual news doesn’t come as a huge surprise. LeEco purchased about 30 percent of Coolpad in two tranches for a combined $500 million in 2015 and 2016, when it was at the height of its meteoric rise. Coolpad had a relatively sound name at that time, though it was already feeling the effects of intense competition in China’s smartphone space. Fast forward to the present, when the future of both companies is in serious doubt, as each loses big money and struggles under major debt piles. Read Full Post…
Bottom line: Xiaomi’s growing comeback is giving it confidence to launch an IPO plan, as its loss of a trademark case in Europe highlights renewed obstacles it will face in its global expansion.
Xiaomi eyes Hong Kong IPO
Comeback kid smartphone maker Xiaomi is in a couple of headlines as we reach the middle of the week, including one that highlights its return to growth and another that shows the obstacles it will face as it continues with its global expansion. The first headline has media reporting that Xiaomi is planning an IPO as early as next year, as its sagging valuation finally returns to a growth track. The second has the company suffering a setback in Europe related to a trademark dispute with industry colossus Apple (Nasdaq: AAPL), highlighting the perils it is likely to face as its global expansion moves into more developed western markets.
It’s still a bit early to say whether Xiaomi’s comeback story has legs, though growing signals are certainly pointing in that direction. I know at least one person who is a Xiaomi fan and goes out of his way to buy their phones, which means that at least some people are coming back to the brand. That’s a shift from a couple of years ago, when the company’s legions of early fans abandoned the brand after it lost its early trendy image and became more known for product problems and other glitches. Read Full Post…
Bottom line: Apple should be able to extend its return to growth in China into at least one more quarter, while Xiaomi should also be able to continue posting strong double-digit growth for the next year.
Apple returns to China growth
Apple(Nasdaq: AAPL) has just released its latest quarterly results that show China is back on a growth track, quieting skeptics who had said its latest iPhone was debuting to mostly snoozes in the world’s largest smartphone market. On a broader basis, IDC has also just announced its global figures for third-quarter smartphone sales, showing Huaweicontinues to creep up on Apple and could well take the global No. 2 spot from its U.S. rival over the next year if current trends continue.
Last but not least is China’s own Xiaomi, which is catching people’s attention again with the strongest growth of any global players in the third quarter, consolidating its position as the world’s fifth largest player. It’s probably too early to say that Xiaomi’s comeback story has legs. But the company is the only one posting triple-digit growth among the top 5 in the latest quarterly results, a distinction previously reserved for Huawei and Chinese rival Oppo. Read Full Post…
