Category: China

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China Stocks

Got some China Mobile

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I decided to buy some China Mobile shares, after did some reading in the weekend. Today’s news is China Mobile walked away from Apple regarding iPhone, cool. Since I placed a limited order ($85.25) last night, I got it at $84.22 shortly after it started trading.

Two things: China Mobile (NYSE:CHL; HK:0941) is not cheap, at PE 33 and a market cap of about $340 b (Yahoo and Google Finance), it is the biggest mobile operator in the world. It has around 362 m subscribers (end of Nov 2007, according to its web site). Note the stock price has gone up 100% in 2007, and about 80% in 2006.

On the other hand, China Mobile is growing at around 20% top and bottom line. For a company of that size, it’s not easy. And one nice thing about it, it does not carry as much risk as other Chinese ADRs (say LFC, or PTR). This is important in current uncertain economy and market environment; and relevant for me after I suffered the paper loss from CROX and LFT. I believe people (especially young people) in China will use their mobile phone talk to their friends, text messaging, get to Internet…even if Chinese economy slows down after Olympics, as many people expected (which I don’t agree).

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Business China

China corporate tax rate reform: winner and loser

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The following screen shot is from Capital Week Jan 5, 2008

2006_7_CHN_Tax_rate

We know from Jan 1 2008 China will have a unified corp tax rate of 25% (some tax rebate for certain industry and foreign enterprises will still apply for a while).

It appears retailer, bank, home builder, and telecom (include mobile phone) will be the big winner here as they are paying a rate of 37%, 34%, 35% and 37% in 2007, respectively. From year 2008 they will enjoy the lower rate of 25%.

On the other hand, it will have little effect for Information technology, automotive, and machinery etc. as they are enjoying lower tax rate and will enjoy it for a while.

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China IPO

Two more questions for Longtop

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longtop logo

1) Why it quit the outsourcing biz?
We know outsourcing is a typically low margin business. Interested readers can look at the VanceInfo (formerly WorkSoft), the first Chinese IT outsourcing company listed in Nasdaq. It did IPO recently.

Longtop should not get into the oursourcing business to begin with. I suspect the VCs suggested the company to quit the outsourcing business, and the company did so early this year. This move will improve the profit margin and it will look good on the finanial statement. More importantly, it will save the company resources and focus on its main business: the software and service for China financial industry.

As a side note, by quiting outsourcing Longtop may have avoided the effect of “slowdown” of US financial sector (depends on the type of customers they serve). From I heard from Cisco conference call a while back, the US financial indutry is cutting back on IT spending now.

2) Effect of tightening monetary policy
For example, the raise of bank reserve rate by People’s bank of China. The move was to make sure economy not overheat, and banks should be prudent on its lendings. This will not have effect on banks’ IT spending. Because the bank IT budget is separately from its bank reserve. As I said in my previous post, banks are increasingly rely on sophiscated IT systems for customer relations, marketing and sales, internal management, etc.

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China Stocks

Random thoughts about China housing bubble

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All right, now the Chinese regulatory (People’s Bank, China banking regulatory commision, China Securities Regulatory Commission,…) got what they wished for this Christmas: after the cool down of the doemstic stock market, now housing market started take a turn (according to many experts including Vanke CEO Wang Shi). This is reflected in the sharp declining of home builder stocks in China (think Vanke 000002). And in the US, two China real estate ADRs, EJ and XIN, both lost more than 10% today.

I think most people will agree the existence of bubbles in China stock market and housing market. But many of us disagree how big it is; is it causing problem for the real economy (overheating), and introduce unecessary risks? I am not economist and do not pretend to be one. The interesting thing for me, is that the Chinese regulatory took the notes from the melt down of US sub-prime loans, and tried to be one step (or maybe many steps) ahead of the curve. (Below, E-House/EJ office on Changning Rd, Shanghai)

E_House_CN

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Business China

What is second home?

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Week in review 12-09 to 12-15

1) China central bank, along with China Banking Regulatory Commission, defined “what is second home” for the lending purpose: it will be measured against a family (husband and wife), not individual. See this NetEase news.

12月11日，央行、银监会联合发布《关于加强商业性房地产信贷管理的补充通知》明确规定，以借款人家庭为单位认定房贷次数。另外，如果首套住房人均面积低于当地平均水平，再贷款购房还是按照首套标准执行。业内人士解释，以家庭为单位来界定，就相当于夫妻双方无论任何一方有向银行申请房贷的记录，另外一方再贷款买房，都要按照房贷新政执行，即提高首付比例的同时，贷款利率按照现行贷款基准利率的1.1倍来计算。

For more info, check out Baidu.

A smart move to contain the housing speculation. But will it really work as desired?

2) US Fed cut interest rate by 0.25, not as much as Wall Street liked. Stock tanked after the announcement. Obvious the baby (Wall Street) is not happy with this Xmas gift from Ben.

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China Stocks

Vanke: good stock at bubble price?

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Stock Price
Shares of Vanke (sina, Google Finance) has gained more than 200% YTD, but it is taking a hit lately. A while ago I read these two interesting articles (21cbh, sina) about the valuation of Vanke share. The key question is whether it is over priced, considering its growth potential. Of course no one can predict the growth. At the beginning of 2007, has anyone predicted the housing price in Shanghai would go up 30% to 50% this year? I know I did not…

Housing Price
Vanke chairman Wang Shi said the Chinese housing market is at its turning point now. I don’t know whether the Chinese housing market is peaking out or not. In the following I used its monthly sales data and tried to calculate the average price in last 7 months. The ave price went from 7,634 Yuan per sqm in May to 10,393 Yuan per sqm, a 36% gain. From May 31 to Nov 30 its stock went from 19.41 Yuan to 31.55 Yuan, a 63% gain.

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China Life

Nanjing Dec 1937 and USS Panay

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I would like shift my focus away from the stock market, and dedicate this special day to Nanjing and Chinese people all over the world. Nanjing is the sister city of Saint Louis.

Many Chinese people (e.g., my friend Wang Jianshuo) know the Nanjing Masasccre happened 70 years ago. Couple days ago I heard a story on NPR which talked about some Japanese and Chinese people got together at Nanjing Normal university theater to commerate. Note the place was an international sanctary which saved lots of Chinese refuge at that time.

And many American people know that the US warships were bombed by Japan in Pearl Harbor.

But for me until this morning did I know that a US navy ship USS Panay was hit by Japan on Dec 1937, in the Yangze River outside of Nanjing. They were doing some rescue for American at the time. The interesting part (for me) in this NPR story is a sailor got 1,200 USD from Japanese goverment and an apology from the emperor. Note at the time $800 can buy a new car.

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China IPO

Two new Chinese IPO

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came to the US (NYSE) today.

One is VanceInfo, which I mentioned earlier in an earlier post. Quote myself:

“Also, I noticed the first Chinese software outsourcing company, VanceInfo, is going IPO in NYSE. Here is the prospectus. One word of caution: from my own experience, the Dec IPO ususally is not going to be a strong as the investment bankers try to make their bonus. So be careful.”

Another one is the first real estate developer (home builder, the one scared many people recently) listed in the US, Xinyuan Real Estate Co., based in Zhengzhou (Henan) China. Prospectus here. This one (NYSE:XIN) “The Company’s network covers more than 34 million people in five strategically selected Tier II cities, including Chengdu, Hefei, Jinan, Suzhou and Zhengzhou…”. One reason for the US listing is Chinese regutory is very tight on the listing of real estate developers, being afraid of the repeat of housing bubble seen in Japan, Hongkong and most recently the US.

Xinyuan Real estate logo

Here is a link to a Xinyuan community in Zhengzhou (via Soufun). And Chinese intro: 鑫苑（中国）置业有限公司，成立于1997年，是一家专注于大型复合社区开发，拥有10余家分子公司的专业房地产企业集团。过去的十年，年均销售复合增长率86％，客户满意度近100％。公司已在郑州、苏州、成都、合肥、济南等地拥有房地产开发项目，目前在建面积超过200万平方。2006、2007年连续两年入选中国房地产百强企业，2007年跻身中国中西部房地产公司品牌价值TOP10。

Categories
Business China

CompUSA, Dell, TV-Guide and NetEase

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Week in review Dec 2 to Dec 8

1) All remaining CompUSA stores to be closed (bloomberg). I think it’s understandable from business point of view, because selling computer is a tough business these days. It is a commodity business, and unlike other commodity such as gas or coffee, a customer only buy a new PC/laptop once every a few years.

Similarly, I can understand Dell computer lackluster financial performance lately, and its decision to sell PCs at BestBuy (reuter news). People used to buy Dell because it offers most bang (more disk and memory, faster CPU, etc) for the buck, but nowadays people buy computer and electronics not solely for the “bangs”, they look for the brand, design, fashion (think Apple iBook, MacBook).

2) MacroVision (MVSN), the licensing software company, announced to buy GemStar-TV Guide (San Jose Mercury News). Normally when company A buys company B, the company A stock will drop, and company B stock will rise. In this case, interestingly, both companies’ stock drop big. I, for one, can not understand why a software company will buy a traditional magazine company.

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China Stocks

CICC 2007 investing strategies

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(Update Dec08) They released 2008 forecast, here is excerpt.

中金2008年股票策略报告认为，中国A股市场高估值状况将在2008年持续，大盘蓝筹股明年上升空间为30％－40％，并看好金融、地产、零售、钢铁和电力等五大板块的投资机会。

(Original) We are at the end of 2007, and it’s interesting to reflect how the market did, how our portfolio did, and how the analysts did (to forecast the market).

In the begining of this year, I have the oppertunity to read this CICC 2007 investing strategy report (PDF file here). CICC, China International Capital Corp, 中国国际金融有限公司, is striving to be China’s own Morgan Stanley. The reason I posted it here is not to evaluate how the CICC analysts did in terms of forecasting, but rather to help our own self-reflection: what went right, what went wrong? Hopefully we will be better investors as we continue to learn,…

CICC_2007