Credit crackdown exposes flimsiness of China rally 19 Jan 2015 Mainland stocks dropped 5 pct after regulators temporarily banned three brokers from opening new margin-trading accounts. The controls may cool rather than kill Chinese investors’ new enthusiasm for shares. But it’s a reminder how much the market mania depends on borrowed money.
The profit and loss of going broke in China 15 Jan 2015 When companies like developer Kaisa get into trouble, the result is often a messy scramble. Foreign creditors can be left with pennies as government meddling and offshore structures create unpredictable outcomes. Collateral helps, but nuisance value is often the deciding factor.
Milk slump sends warning on China consumer froth 14 Jan 2015 Infant formula maker Yashili estimates its earnings fell 40 percent in 2014. Its shares have halved in just over a year. Other dairy makers too have been caught short by a collapse in demand. China’s babies still need milk, but demographics make a poor foundation for investments.
Jack Ma factor makes investors starry-eyed 14 Jan 2015 The involvement of China’s richest man in a drugmaker’s share placement has sent the company’s market value up by over $1 bln. There may be synergies between e-commerce and pharmaceuticals, but details are lacking. Investors are too eager for the Jack Ma endorsement.
Cheap oil lubricates Li Ka-shing’s corporate rejig 12 Jan 2015 Asia’s richest man is shifting a 6 pct stake in Canada’s Husky Energy to his holding company as part of a broader shake-up. The move is vital to keeping Li’s grip on the telco-to-property empire. Though shareholders may object, the falling oil price has worked in their favour.
Investors drive blind in China online auto deal 12 Jan 2015 E-commerce group JD.com is buying 25 pct of car portal Bitauto for $1.2 bln. Yet two-thirds of the value is in the form of “resources”, like handing over part of JD.com’s website. Though a tie-up may make strategic sense, shareholders have to take the financial benefits on trust.
Li Ka-shing converts to shareholder value religion 9 Jan 2015 Asia’s richest man is splitting his empire in two: a property company, and everything else. The reshuffle should help shrink the conglomerate discount while allowing Li to leverage up in real estate. It’s an overdue recognition there is value to unlock in the $85 billion empire.
China’s Latin love more marriage of convenience 9 Jan 2015 A pledge of $250 billion of investment in Latin America won’t quite replace falling oil revenue for stricken countries like Venezuela and Ecuador. Even so, the co-operation is helpful. After being battered by market forces, China’s non-market way of doing business must appeal.
StanChart equities closure is overdue but welcome 8 Jan 2015 The emerging markets bank has pulled the plug on its share trading and underwriting arm, cutting 200 jobs. It’s a rational but still-rare step for a business that suffers from chronic overcapacity. Rivals will feel extra pressure to justify their decision to soldier on.
Dismantling a Chinese developer could get ugly 7 Jan 2015 Stricken housebuilder Kaisa denies it has decided to wind itself up after defaulting on a loan. Even so, a debt restructuring looks inevitable. That will pit bondholders against banks and homebuyers who paid up front, and expose the flimsy structures foreign investors rely on.
China’s innovators could use a patent war 6 Jan 2015 Conflict could breed creativity for China’s tech industry. New patents are being minted, but companies rarely go to court to protect them. There may be political reasons, but more discord would show Beijing is serious about enforcement, and not just against foreigners.
Property default rattles China debt neighbourhood 5 Jan 2015 Developer Kaisa hasn’t repaid a loan that came due, even though it is not obviously strapped for cash. Lender HSBC may yet work out a deal. But given Chinese groups’ dependence on foreign capital markets, such apparently irrational behaviour ought to have investors on alert.
China index: Ending the year without a bang 2 Jan 2015 Breakingviews’ alternative growth gauge slowed slightly in November. In contrast to the same period last year, measures like residential property investment and export growth dragged. Shrinking steel production, rail freight and truck sales set the scene for a quiet year-end.
China rail merger reveals topsy-turvy reform logic 31 Dec 2014 The People’s Republic is re-creating its domestic train-building monopoly to boost competitiveness abroad. State-backed CSR will buy almost identical CNR for $14.4 bln. Synergies may take time to realise but the new giant should be able to turn up the heat on foreign rivals.
Alibaba in 2016: an imagined letter to investors 29 Dec 2014 The e-commerce group’s first year as a listed company brought growth and change, departing chairman Jack Ma writes in a hypothetical memo. Profitability is falling, regulators circling, and new projects have uncertain returns. Even a thoroughbred is tested on a long journey.
Cheaper oil no friend to Asia’s households 24 Dec 2014 Real wages are growing 2 percentage points below their long-term average, reflecting labour’s weak bargaining power amidst slowing growth. Falling oil prices and low inflation could prompt employers to be even more tight-fisted in 2015. Household finances might wobble.
Stick with BRIC 22 Dec 2014 It’s easy to mock the idea that the four biggest emerging markets – Brazil, Russia, India and China – will reshape the world economy. But the balance is still moving their way, even with slowdowns and Russian turmoil. Markets say otherwise because they were too keen at first.
China-U.S. shift will end Cold War peace dividend 22 Dec 2014 The PRC’s military outlays may match Uncle Sam’s in 15 years, while U.S. policy paired with Russian aggression could force up EU spending. Western defense firms face more competition, but added demand. Governments may have to choose between just rearming and an all-out arms race.
China will make 2015 year of missed opportunities 22 Dec 2014 Foreign investors hope for a more open, balanced China. Its leaders have other ideas. They favour reforms that minimise financial instability, punish bad eggs, and nurture national champions. President Xi Jinping’s popularity quest will raise tensions with the rest of the world.
Tycoon graft trial shows HK law worth fighting for 19 Dec 2014 A former official and a property mogul have been found guilty of charges relating to misconduct in public office. The transparency, unpredictability and lack of a neat ending make it very different from similar cases in mainland China. That’s just the way rule of law should be.