stlplaceStudent studying at KFC, I also see students studying at McDonald. Note in China both KFC and McDonald are fashionable gathering places for middle/high school and college students.
My first Chinese KFC meal in many years, I got headache after eating that 🙁
I got to see Michael on CCTV Channel 2 yesterday. He was participating a show as a guest. The show is about the “entrepreneurs born after 1980s” (Michael was born in 1960s).
I noticed he said something interesting about New Oriental “listed in NYSE”: if I could regret, I wish we haven’t done that. On the surface it seems strange, who does not want to get rich? But I think he meant this: being listed in NYSE is a huge responsibility, if he had known all the pitfalls of “listing in the US” (not just Sabane-Oxly), he would re-consider.
But in reality he couldn’t. Because he is not the sole owner of the company. Both VC (refer to Shao’s blog about VC’s timeline) and his colleagues (many are minority stock holders) wanted to cash out. The company could use the IPO proceeds to expand; note the competition has also heated up too. The “listed in NYSE” will also help them build the brand, globally.
Back to Michael’s reponsibility. As soon as he took money from the Wall Street, he was expected to deliver the financial results to meet the street. He and his team did very well in first two Qs, but they missed the lastest Q. I bet he did not get much good sleep lately, because he needs to make sure next Q will come out OK.
Yesterday, ICBC, Industrial and Commerce Bank of China (6001398.SS), went up 0.57 (just one cent shy of 10%), and closed at 6.37 Yuan. With that price, ICBC exceeded Citibank and became the world largest bank (market cap wise), and closes in Microsoft in terms of market cap (bloomberg).
I remember last time ICBC closed in Citibank was 3 or 4 months ago, but this time it has more sustance (I mean fundamental, or earnings). Chinese banks, along with real estate developers, are on the fire lately and people attribute that to:
1) The rise of the Yuan.
2) The continuing growth of domestic economy, along with rising CPI (inflation) and rising property value. The actual bank interest rate is negative if you consider the inflation (4%).
The China stock market is breaking new high again, after the May 30 “man made” crash, and amid the “housing and financial crash” in the US. Yesterday I heard from a family member, who was fairly cautious about the stock market, now thinking about put the money back to the market. This is confirmed by the warming up of “new account” opening in Shanghai and Shenzhen. After the raise of stamp tax, the interest rate, and bank reserve rate, the fearless Chinese stock investors (especially institutions) pushed blue chips such as China Merchants Bank, Vanke to their new high.
The million dollar question is: can this rally be sustained? Well, I will let the analysts and experts to comment on this. My job is provide the facts. In the weekend I saw a new newspaper named “Li Cai Zhou Bao“, or “financial weekly”, interestingly it’s being translated to “Smart Money”. Curious about its content, I shelled out 6 Yuan and got a copy. This is a title of No. 1 article “The stock most likely will go up to 100 in no time“. Well, I remember couple weeks ago, Cramer did this “80 to 120” series on his mad money, we all know what happened after his show (hint: Dow crash).
Shanghai is an expensive city. I’m not talking about the red hot housing market, we all know the housing is getting very expensive here. I was talking about the relative income vs. spending.
Income
Yesterday evening an old friend of mine, who works for a investment research firm, told me a fresh graduate is paid CNY 3,000. This is actully fairly high pay for new college graduate, cosidering financial is a hot area, and the fresh graduate is from Tsinghua/Bei Da (think that as MIT, or Harvard of China), with very good spoken English.
Experienced people are paid more. I learned from anothetr friend who is a HR executive, about 10% of people makes more than CNY 10,000 per month. Note this is also the threshold of income tax.
In the IT arena, I know some senior developer positions at MSFT pays more than 20,000 Yuan per month. I believe other multinational companies should have equivalent pay.
Got back to Shanghai in the weekend; my limit observations in past 2 days suggest those two are hot besides the weather. Don’t run and buy stocks solely based on this.
Crocs: I saw people wearing Crocs near Zhongshan Park, at Hongqiao Parkson Shopping Mall and Jinjiang Chef (restaurant). Today my co-worker told me this thing was selling very well in the mall. I saw a guy wearing red crocs while riding motor cycle; and girl wearing Jibbitz too.
Apple iPod: by now probablly everyone in the US (who can get iPod) already got one (hint: yours truely also got one). But in China this iPod trend is in the early innings. Mac is also sold here. Maybe the iPhone will follow after everyone in the US got one?
I read this from Netease: Perfect World, a Chinese online game co., will debut in Nasdaq under ticker symbol PWRD tomorrow July 27.
Here is the prospectus from SEC. The company was not profitable in 2005, and 2006, but it turned corner in Q1 2007. It seems other Chinese online game companies are also coming because the market started to warm up to SNDA, NCTY etc, and the craziness of Wii.
I’m not a gamer, and I’m packing for back to home trip. So I will leave the analysis to experts.
It’s the Chinese Yuan (CNY), or Ren Ming Bi (people’s money). In early march, when I was in Shanghai, one USD is worth 7.72 Yuan, now it’s about 7.56 Yuan, a loss of about 2% in about 4 months. It appears this trend is not going to stop for a while. This is scary if you happen to make money in USD, save it USD and plan to retire one day in China. Because the dollar may drop faster than the rate of saving. So how do we play this?
Besides buying Chinese real estate, or buying the A-shares in Shanghai or Shenzhen (or H-shares in HK), there are other options. The mutal funds with a focus on China, or Chinese ADRs (stocks) traded in NYSE or Nasdaq. Some of the well known names include:
FXI: the full name is iShares FTSE/Xinhua China 25 Index, you can see its holdings here: it’s basically a basket of Chinese red chips traded in HKSE, such as CNOOC (CEO), Petro China (PTR), China Mobile (CHL), China Life (LFC). Those stocks are also traded as ADRs in NYSE (you may click on the ticker above to check out each stock).
LFC: on the surface LFC is a life insurance company in China. It’s more than that. It actually is a holding company of many domestic companies. For instance, it has significant stakes of MingShen Bank (600016), and Citic Securities (600030), both of them are listed in Shanghai Securities Exchanges (SHSE).
Both FXI and LFC have done very well lately, as you may know, because of the red hot Chinese stock market. I don’t personally own them. But my friend Sun has LFC, and it has done very well for him (of course he bought it long time ago so his cost is much lower). I think those two are good options if one doesn’t want to spend much time on stocks: keep in mind if you plan to hold it for long time, you can wait for a pull back to build your position.
in its fiscal Q4 2007 earning. The analysts were expecting 1 cent, while EDU reports loss of 4 cents. Ouch, that’s even worse than last week’s Google’s miss (3 cents).
Seriously, I don’t think missing a few pennies is not big deal for long term investors. But the reason behind the miss is more important. In EDU’s case, on the surface it’s the seasonality: the late arrival of Chinese New Year this time push sales from fiscal Q4 to Q3.
I did listen to its conference call (7 AM!), here are a few highlights:
1) The English training still is the main revenue source and growth driver, that includes: oversea test preparation (students enrollment increased from 35,000 in fiscal 2006 to 58,000 in 2007) ; kids English; middle school students English.
2) New growth area: other subjects (math, physics, chemstry etc.) for middle school students; pre-school kids education (not limit to English).
3) Tier one, tier two: plan to add more learning centers in tier one cities (Beijing, Shanghai), note Shanghai is the fastest growth city; it won’t open many schools in tier 2 cities (mostly kids English) where it did not get good name recognition (this strategy is opposite to Home Inns’).
The stock got punished today as people were expecting a block buster number. I don’t bet on earnings these days, nor will I try to catch the falling knife here. I think a 30% growth is good if they can sustain the growth for a while, but the street obviously expects more.
MR closed above HMIN the first time since its IPO last Sept. MR closed at 30.89, while HMIN closed at 30.81.
This comparison is mostly for fun. But seriously I do think HMIN is increasing under competitive pressure in China. Here is another hotel chain, Hanting Hotels, founded by Ji Qi, the co-founder of Ctrip and Home Inns. Recently it raised $85 m from VC, this is no small change considering Home Inns raised about similar amount last Oct. through IPO. In last two years Hanting Hotels targeted mostly business travellers who are willing to pay more than CNY 268, but this has changed since early this year, as they entering into the budget hotels arena (head to head against HMIN). In the past HanTing’s profit margin is about 5% higher than HMIN. Of course one can argue that the “budget hotels” pie in China is growing too, so all the players will benefit. I am curious to learn more about this as I’m coming back to China very soon.
On the other hand, it’s far more difficult to enter into the medical device business where Mindray is in, that’s one thing I liked about this business.
Last but not least, Starbucks will raise the price of its beverage by 9 cents starting next week.