|Day's range||110.10 - 110.10|
(Bloomberg) -- Goldman Sachs Group Inc. and Bank of America Corp. were left off Ant Group’s upcoming stock sale in Hong Kong because of their past work with rivals of its affiliate Alibaba, according to people familiar with the matter.Bankers have been told by senior executives at Alibaba Group Holding Ltd., which owns a third of Ant, that they should refrain from doing deals for its competitors if they want business from Jack Ma’s sprawling empire, the people said. Ant has kicked off plans to go public in Hong Kong and Shanghai in offerings that could top Saudi Aramco’s record $29 billion IPO.The directive shows that Wall Street banks are having to make early bets on which firms to stick with in China, especially as juggernauts like Alibaba and Tencent Holdings Ltd. extend their tentacles into hundreds of businesses in finance, transportation, retail and entertainment.“The duopoly issue is not unique to China, but the scale and scope of Alibaba and Tencent’s business operations create an excruciating dilemma for investment banks,” said Andy Mok, a senior research fellow at the Center for China and Globalization in Beijing. “Alibaba and Tencent’s businesses are so big, you can risk being blocked out of a significant future revenue stream.”While bankers everywhere have to be careful doing work for their clients’ rival firms, Chinese conglomerates are taking it to a new level. Even though banks have firewalls to ensure separate teams handle deals for the likes of Alibaba and Tencent, that’s proving to not be enough, the people familiar said.Chinese clients are much more likely than their counterparts in the U.S. or Europe to demand non-compete commitments as a show of loyalty, and to ensure that sensitive strategies don’t land in the hands of competitors. And with fewer deals to go around, bankers in the hyper-competitive Chinese market have little choice but to comply.Though minor distribution roles on Ant’s Hong Kong IPO are still up for grabs, those don’t offer the out-sized fees that banks can expect from leading the sale.“Competition has increased and Chinese issuers have gotten strong bargaining power,” said Bob Dodds, who worked as an investment banker at China International Capital Corp. before setting up DRP Capital Ltd. to advise on China-related deals.Goldman and Bank of America’s recent work with Alibaba rivals include $7.7 billion in stock sales for Tencent-backed Pinduoduo Inc. and JD.com Inc. in the last two years, helping these companies build their war chests to take on their larger competitor in the hotly contested e-commerce arena.The two banks have reaped at least $70 million from advising Pinduoduo and JD.com on stock deals, according to data compiled by Bloomberg. The figure doesn’t include the undisclosed fees of a $1 billion bond sale by Pinduoduo in September and the $4.5 billion secondary listing by JD.com in June.Representatives at Goldman and Bank of America declined to comment. Ant and Alibaba declined to comment in separate emailed statements.IPO BankersAnt is aggressively competing with Tencent’s WeChat Pay to maintain its dominance of China’s $29 trillion mobile payments space. It has been pitching digital payment services to the local arms of KFC Holding Co. and Marriott International Inc. as it transforms its Alipay app into an online mall for everything from loans and travel services to food delivery.Alipay’s share of mobile payments has increased for three consecutive quarters, rising to 55.1% in the fourth quarter, according to consultant iResearch. Tencent has 38.9% of the market.Ant hired Citigroup Inc., JPMorgan Chase & Co., Morgan Stanley and CICC to lead its Hong Kong IPO. The sale is expected to raise more than $10 billion and could value the firm at $200 billion, people familiar have said. Ant hasn’t selected banks for the Shanghai portion, though global firms will probably be left out because lead underwriters for any IPO on the tech-focused Star board must buy shares in the deal.Banks leading the Ant IPO in Hong Kong have fewer conflicts. While Morgan Stanley earned $6.4 million for a junior role in Pinduoduo’s stock sale last year -- about half of Goldman’s haul -- Citigroup and JPMorgan weren’t involved in those deals, Bloomberg data shows.(Adds details on Alipay and WeChat Pay’s market share in 13th paragraph. An earlier version of the story was corrected to show Ant has kicked off its IPO process.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Amazon.com (NASDAQ: AMZN), Alibaba (NYSE: BABA), and Shopify (NYSE: SHOP) stand as the world's biggest e-commerce companies, and each stock has recently gone on to hit new highs. Amazon delivered another stellar earnings report when it published second-quarter results on July 30, with sales and profit for the period both surpassing the market's expectations. Total sales in the quarter climbed 40% year over year to reach $88.9 billion, and the company's earnings per share soared 97% to come in at $10.30.
(Bloomberg) -- Nvidia Corp. is in advanced talks to acquire Arm Ltd., the chip designer that SoftBank Group Corp. bought for $32 billion four years ago, according to people familiar with the matter.The two parties aim to reach a deal in the next few weeks, the people said, asking not to be identified because the information is private. Nvidia is the only suitor in concrete discussions with SoftBank, according to the people.A deal for Arm could be the largest ever in the semiconductor industry, which has been consolidating in recent years as companies seek to diversify and add scale. But any deal with Nvidia, which is a customer of Arm, would likely trigger regulatory scrutiny as well as a wave of opposition from other users.Cambridge, England-based Arm’s technology underpins chips that are crucial to most modern electronics, including those that dominate the smartphone market, an area in which Nvidia has failed to gain a foothold. Customers including Apple Inc., Qualcomm Inc., Advanced Micro Devices Inc. and Intel Corp., could demand assurances that a new owner would continue providing equal access to Arm’s instruction set. Such concerns resulted in SoftBank, a neutral company, buying Arm the last time it was for sale.No final decisions have been made, and the negotiations could drag on longer or fall apart, the people said. SoftBank may gauge interest from other suitors if it can’t reach an agreement with Nvidia, the people said. Representatives for Nvidia, SoftBank and Arm declined to comment.Divestment Drive“With Nvidia’s low-cost fabless model enabling it to focus on R&D, engineering and programming, the fit with Arm would be perfect,” said Neil Campling, an analyst at Mirabaud Securities.Nvidia is the largest maker of graphics processors and it’s spreading the use of the gaming component into new areas such as artificial intelligence processing in data centers and self-driving cars. Marrying its own capabilities with central processor units designed by Arm may enable it to take on Intel and Advanced Micro Devices in a more comprehensive way, according to Rosenblatt Securities analyst Hans Mosesmann. He estimates Nvidia would have to pay about $55 billion for Arm.“You need control of BOTH CPU and GPU roadmaps and this, of course, includes data centers,” he wrote in a note Friday, referring to central processing units and graphic processing units. “Strategically, Nvidia needs a scalable CPU that can be integrated into its GPU roadmap, as is the case with AMD and Intel.”Billionaire Masayoshi Son has been selling some of SoftBank’s trophy assets as the company seeks to pay down debt at the Japanese conglomerate. SoftBank has offloaded part of its stake in Chinese internet giant Alibaba Group Holding Ltd. and a chunk of its holdings in wireless carrier T-Mobile US Inc.SoftBank has been exploring options to exit part or all of its stake in Arm through a sale or public stock listing, Bloomberg News has reported. The chip-design company could go public as soon as next year if SoftBank decides to proceed with that option, people with knowledge of the matter have said.Arm has become more valuable as it pushes its architecture into smart cars, data centers and networking gear. The company could be worth $44 billion if it pursues an initial public offering next year, a valuation that may rise to $68 billion by 2025, according to New Street Research LLP.Nvidia, based in Santa Clara, California, is the world’s largest graphics chipmaker. The stock has surged more than twenty-fold in the past five years, giving the company more firepower to do large deals. Nvidia’s market value has increased to more than $260 billion in that time, surpassing Intel. The stock was little changed Friday in New York.(Updates with analyst comment in eighth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Amazon.com (NASDAQ: AMZN) has delayed the kickoff of its annual Prime Day sales extravaganza until the first week of October because of the coronavirus pandemic. The online retailer was overwhelmed with orders due to the COVID-19 outbreak shutting down all nonessential retail stores, that Amazon even temporarily halted its third-party shipping program so it could prioritize shipments of personal protective equipment. Now that the onslaught has abated some, though shipment volumes remain high, Amazon is able to return to a semblance of normalcy and the third-party shipping program has resumed.
China's top antitrust agency is looking at whether to launch a probe into Alipay and WeChat Pay, prompted by the central bank which argues the digital payment giants have used their dominant positions to quash competition, sources with knowledge of the matter said. The State Council's antitrust committee has been gathering information on Alipay, owned by Ant Group which in turn is an affiliate of Alibaba Group Holding Ltd <BABA.N>, as well as on Tencent Holdings Ltd's <0700.HK> WeChat Pay for more than a month, they said.
(Bloomberg) -- Apple Inc. pulled off a strong quarter in China by switching up retail tactics and pushing a cheaper iPhone, becoming one of the few U.S. tech giants to ride the country’s post-pandemic recovery despite Washington-Beijing tensions.IPhone shipments there surged a surprising 35% in the April to June period, research firm Canalys estimates, driving a 2% rise in Greater China revenue to $9.3 billion. Chief Executive Officer Tim Cook said sales actually grew 6% on a constant-currency basis, propelled by demand for Macs and iPads from millions now accustomed to working from home. Its out-performance in Greater China -- Apple’s single biggest international market -- drove quarterly revenue well above Wall Street’s forecasts.Apple’s strength in the world’s No. 2 economy surprised analysts who’ve seen local consumers turn increasingly to homegrown brands, at a time Washington accuses the likes of Huawei Technologies Co. and ByteDance Ltd. of spying or jeopardizing national security. Huawei -- the company most squarely in Trump’s cross-hairs -- eclipsed Samsung Electronics Co. in global smartphone sales for the first time last quarter, thanks in large part to an upswell of home-crowd support.Apple, whose Chinese-based suppliers employ upwards of a million people, was swift to adapt its tactics after Covid-19 emerged in February, turning to third-party distributors after shutting most of its stores. It also focused on marketing and selling online, tapping the surge of internet activity that followed a rolling nationwide lockdown.The iPhone maker jumped aboard a plethora of online sales promotions hosted by Alibaba Group Holding Ltd. and JD.com Inc. in June, traditionally one of several peak spending months. Apple moved more than 500 million yuan ($72 million) of devices in a single day during JD’s “6.18” shopping marathon, the Chinese company said. It probably also benefited from the introduction of a lower-cost smartphone, the iPhone SE.“Apple defied expectations in Q2. Its new iPhone SE was critical in the quarter,” Canalys analyst Vincent Thielke said. “Apple is also demonstrating skills in new user acquisition.”Read more: Apple Smashes Revenue, IPhone Estimates on Pandemic DemandFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Ladies and gentlemen, thank you for standing by and welcome to Silicon Motion's Technology Corp. Q2 2020 Earnings Conference Call. Following my comments, Wallace will provide a review of our key business developments and then Riyadh will discuss our second quarter results and our outlook.
Online retail is primed for decades of growth as consumers and enterprises do more of their shopping online, and top players in the space will likely deliver stellar performance for shareholders. Read on to see why they think Baozun (NASDAQ: BZUN), eBay (NASDAQ: EBAY), and Alibaba (NYSE: BABA) have what it takes to deliver market-crushing returns. Keith Noonan (Baozun): China's large and rapidly expanding online retail industry presents attractive opportunities for growth, and many companies around the world are looking to the market as a key part of their long-term strategies.
Taobao today launched a new rating system that rewards outstanding young creators and small businesses with greater market exposure.
(Bloomberg) -- Leaders in India’s technology industry are urging the country to go even further to protect the interests of local companies against foreign rivals, or risk ceding the world’s fastest growing internet arena to Chinese and American monopolies.Narendra Modi’s administration this month banned 59 Chinese apps in the country, including ByteDance Ltd.’s short-video hit TikTok, a dramatic policy shift aimed at improving local control and data security. In separate interviews, Policybazaar co-founder Yashish Dahiya -- whose company is backed by Tencent Holdings Ltd. -- and MobiKwik frontman Bipin Preet Singh urged Modi to go further. Emboldened by growing hostility against its giant neighbor, they want regulators to curb their access to Indian markets, establish rules to wrest back control of user data and bankroll local startups.“China has long been the bratty kid who thinks it’s OK to grab others’ cake without sharing your own,” Dahiya told Bloomberg News last week. India must strategically reduce market access before its neighbor becomes even more powerful. “If India doesn’t do it now, it can never be done,” said Dahiya, whose online insurance service targets a 2021 IPO at a $3.5 billion value.Dahiya and Singh are breaking with tradition in an Indian startup sector that over the past half-decade has attracted billions from Chinese companies and investment houses from Alibaba Group Holding Ltd. to Hillhouse Capital. Their stance reflects a shift in sentiment after a mid-June Himalayan border clash left 20 soldiers dead -- but also a wave of techno-nationalism as the coronavirus pummels global economies. It coincides with a surge of interest from American giants like Facebook Inc. and Google as India’s nascent digital economy blossoms.“It’s not an easy position to take,” said Dahiya, whose Policybazaar is now trying to raise $250 million of pre-IPO financing. “A sovereign nation has no parent but someone’s got to stop China from misbehaving.”On Tuesday, an official with China’s Indian embassy said Beijing will take “necessary measures” to protect the country’s companies from a ban that threatens their legitimate rights, and urged Modi’s government to reverse “wrongdoings.”Before TikTok overtook YouTube to become India’s most popular social video platform, the dominance of WhatsApp and Amazon.com Inc. and Walmart Inc. in e-commerce had already rankled local businesses. Beijing is now the bigger target, as the world polarizes along U.S.-China lines and American-backed local champions such as Mukesh Ambani’s Jio Platforms emerge. The influx of American investment sets up a potential clash with China’s own internet titans in the future -- provided they’re allowed to operate in the country.That, along with trade barriers erected in just past weeks, may have fired up the entrepreneurs. The government should identify strategic sectors and nurture local startups, MobiKwik’s Singh advocated.“The China versus U.S. battleground is neither China nor the U.S., but India,” said Singh, whose Sequoia Capital-backed payments startup competes with both Google Pay and Alibaba-backed Paytm.“If India’s entire 1.3 billion population is served only by foreign companies, how can that be a good thing?” he said in a telephone interview from his base in New Delhi. “Yet India doesn’t have a single technology giant, it’s become a growth engine for global companies. What is India doing wrong?”Read more: India Builds Trade Barriers With China Amid Border RowIndia’s unprecedented apps ban thwarted the global ambitions of China’s technology giants just as the spotlight is turning on the world’s largest untapped digital frontier. ByteDance and other targeted companies have since attempted negotiations with New Delhi, but they’ll have to contend with more than mere legal obligations.India’s roaring digital economy, with half a billion users and growing, is witnessing pitched battles in everything from online retail and content streaming to messaging and digital payments -- but largely between deep-pocketed foreign corporations. That’s coincided with growth tapering off at Infosys Ltd. and Tata Consultancy Services Ltd., which put India’s tech sector on the map but are now grappling with a fundamental shift to the cloud.While India has attracted over $20 billion in just past months from American giants like Google and Facebook, China has over the years carved out a significant role in India’s tech industry, according to Mumbai-based think-tank Gateway House. Eighteen of India’s 30 unicorns are Chinese-funded, researchers Amit Bhandari, Blaise Fernandes and Aashna Agarwal said in a report. Apart from TikTok, smartphone brands like leader Xiaomi Corp. and Oppo have cornered three-quarters of the market. Firms like Qiming Venture Partners nearly doubled Chinese investments in Indian startups to $3.9 billion in 2019, according to the Economic Times.“I’m not advocating a closed or protectionist environment like China’s, but India needs local champions and also needs to safeguard its data and security,” Singh said. “We need competition, we need choices. But we can’t have a situation where there’s no Indian player in entire segments from search to messaging, social media, ecommerce and payments.”Read more: World Economy’s Sputtering Recovery Threatened by Flaring VirusModi’s government has already set things in motion. It drafted an e-commerce policy that openly champions aid for local startups and oversight on how foreign companies handle data. A government panel recommended a data regulator to oversee monetization and privacy of user information to ensure “maximum social and economic benefits” for Indians. Local startups are enjoying something of a renaissance: TikTok-a-like Roposo is signing up half a million new users an hour.But more is needed, Singh said. The system remains stacked against the hundreds of thousands of would-be entrepreneurs who have to take on global behemoths. The government could limit the influence of foreign capital as it has done in sectors like banking, he added.MobiKwik has “raised $100 million so far and is taking on companies with a collective market value of over $2 trillion,” he said. “We are doing injustice to our entrepreneurs if we stack them against dollars and yuans in every single segment.”(Updates with progress of the ban in the 11th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- When the coronavirus put a halt on people’s lives in China in February, Justin Jin’s old university classmates thought about selling face masks to make money. The 21-year-old suggested they instead try their luck with two stocks: Tesla Inc. and Tencent Holdings Ltd.That’s when Jin’s two friends began using the Futubull app, one of the Chinese platforms that allow mainland investors to buy foreign equities. The decision paid off. Both stocks soared as part of a global rally that has enticed a wave of novice investors.“When I first started, there were only three or four friends who used Futu,” Jin said. “Now there are at least three or four dozen.”Thanks to them and many others, Futu Holdings Ltd., a Chinese online brokerage and wealth-management platform, now counts more than 1 million registered users, a 23% increase from the first quarter. Its American depositary receipts have almost quadrupled since a low in March, propelling the fortune of its founder and chairman, Leaf Hua Li, to $1.5 billion, according to the Bloomberg Billionaires Index.Tencent EmployeeLi, 43, was Tencent’s 18th founding employee and left to start Futu after growing frustrated with the software he used to trade Hong Kong stocks, according to a CapitalWatch interview in January. The online broker, backed by the Chinese internet giant, was formally incorporated under Hong Kong law in April 2012. Li owns 40% of its outstanding shares.A company spokesman declined to comment on Li’s net worth.Retail investors have always been a driving force in China’s stock market, but with the pandemic keeping people home, more amateur traders have emerged. Futu reported a 60% surge in new paying clients -- those with assets in their trading accounts -- in the first quarter, with much of it coming from Hong Kong. Big-name stocks like Tencent, Tesla and Alibaba Group Holding Ltd. fueled the surge during the peak of China’s coronavirus crisis in February, according to a statement.One of Futu’s main draws is that, unlike mainland competitors, it has licenses that allow users to go beyond the domestic market and buy equities from the U.S. and Hong Kong. This year’s high-profile secondary listings in the city from JD.com Inc. and NetEase Inc. have enticed more investors, as has the months-long rebound in U.S. stocks, according to Bank of China International analyst Nanyang He.“Futu has benefited from strong market sentiments in terms of raising trading velocity and increasing IPO subscription revenue,” He said.Shares SurgeFutu shares have risen 148% since the company listed in New York in March 2019, outpacing rival Up Fintech Holding Ltd., which went public the same month.While the competition is rife -- Chinese brokerage firm Huatai Securities Co. just launched its own U.S. stock-trading app -- Futu is betting on the increasing number of Chinese citizens looking to diversify their investments globally, He said. The company started a series of MSCI index futures products this month.Li began his career at Tencent after receiving a bachelor’s degree in computer science and technology from Hunan University in 2000. He was an early researcher of the QQ messaging software and founded Tencent Video, now one of the largest video-streaming platforms in China.Li credits his time at Tencent for building his business acumen and said he was inspired by the company’s founders, Pony Ma and Zhang Zhidong, according to the CapitalWatch interview. Tencent remains Futu’s largest institutional backer, and several of its employees were key in helping the online broker grow over the past decade.Still, Li hopes he’ll ultimately be defined by his legacy at Futu.“For a long time, people wondered why I left Tencent at its peak of growth,” Li said in the interview. “Now that Futu has made it, the weight of importance has changed.”(Updates share move since IPO in 10th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Alibaba Hong Kong Entrepreneurs Fund launches JUMPSTARTER 2021 Global Pitch Competition, the World’s largest online startup contest
(Bloomberg) -- Tencent Holdings Ltd. has offered to buy out and take private search engine Sogou Inc. in a $2.1 billion deal, adding to a slew of Chinese technology giants seeking to delist from U.S. bourses.Shares of the social media heavyweight climbed as much as 4.7% Tuesday, buoyed by speculation it will more closely integrate Sogou’s AI technology with its own services and devices to gain an edge on rivals like TikTok-owner ByteDance Ltd.Tencent has in past years come under pressure from ByteDance and other up-and-coming rivals in the emergent short-video arena. Beijing-based Sogou -- whose name translates as “search dog” -- has long been the default in a slew of Tencent products including its marquee social app WeChat. It’s also been making a push into artificial intelligence.A takeover of Sogou also raises the prospect of a lucrative listing in Hong Kong or Shanghai in the future, on the heels of well-received debuts by Alibaba Group Holding Ltd. and JD.com Inc. It’s become an increasingly attractive route for tech giants such as Jack Ma’s Ant Group, which is speeding toward what could be the city’s biggest float in years. Sogou Chief Executive Officer Wang Xiaochuan in 2018 declared his ambition to list on mainland bourses when regulations permit.Chinese internet companies are exploring listings closer to home after a proposed U.S. bill threatened to force them to delist from New York by imposing stricter disclosure requirements -- a prospect that looks increasingly plausible as the Trump administration amps up action against Beijing on multiple fronts. Online gaming company Changyou.com Ltd. got taken private this year by Sohu.com Ltd., and 58.com Inc. is being bought out by a private equity consortium for $8.7 billion.The “market has been anticipating more companies to pursue secondary listing in Hong Kong,” Jefferies analysts led by Thomas Chong wrote. “We consider there will be more synergies between Sogou and Tencent in search and smart devices in the future.”What Blomberg Intelligence SaysTencent’s return to the search engine business may pose a challenge to China leader Baidu, and help fend off competition from potential market entrants ByteDance and Alibaba. Tencent sold search engine Soso to Sogou in 2013. Its bid to buy the 61% of Sogou it doesn’t yet own at $9 per ADS will cost more than $2 billion.\- Vey-Sern Ling and Tiffany Tam, analystsClick here for the research.Tencent is offering $9 in cash for each American depositary share it doesn’t already hold in Sogou, backed by fellow internet giant Sohu. That’s a 57% premium to the target company’s Friday close. Sogou said in a statement it was considering the takeover offer, though Tencent already owns about 39.2% of Sogou but controls a majority of voting power.Sogou, founded in 2005 and merged with Tencent’s Soso search business in 2013, has counted on its partnership with the larger company to help it catch search leader Baidu Inc. Its 2017 IPO also helped bankroll a longer-term AI effort -- about three quarters of its employees are now involved in research and development, according to its website.Sohu’s shares gained 40% in New York, their most in a decade, while Sogou leapt a record 48% to close the gap with the offer price.(Updates with Tencent share action from the second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The world’s largest fintech unicorns are preparing for their debutante balls. Billionaire Jack Ma’s Ant Group is seeking a valuation north of $200 billion in a landmark dual public listing in Hong Kong and Shanghai. Lufax, backed by Ping An Insurance Group Co., is going one step further, braving the U.S. Senate’s new Holding Foreign Companies Accountable Act and targeting to raise at least $3 billion in New York.Billion-dollar initial public offerings are encouraging news for market sentiment. But we can’t help but wonder: Is this really a good time to celebrate their success, when tension between the U.S. and China is escalating into a war for capital?At first glance, the timing couldn’t be better. China’s regulatory environment has become friendlier as Beijing, pinched by the coronavirus, loosens its purse strings. Meanwhile, stock markets are rewarding tech companies that consumers use every day. California-based PayPal Holdings Inc., for instance, has soared about 60% this year. In China, Ant Group’s ubiquitous mobile payment product, AliPay, fits the bill. Paper money is dirty in the Covid-19 era and no one wants to handle cash.But by listing this year, Ant and Lufax run the risk of exposing how volatile and unsteady China’s financial regulations can be, potentially adding fuel to speculation that the nation’s Lehman moment is drawing nearer. Beijing first vowed to clamp down on private-sector debt in late 2017, with the People’s Bank of China pointing fingers at rising risks in asset management and internet finance. It followed with far-reaching rules for the financial industry in April 2018.Since then, regulators have blown hot and cold on practices in the online lending industry, leading to significant uncertainty for loaning out money and the availability of consumer credit. Going public in 2020 means that Ant and Lufax will have to explain what happened to their business models in 2018 and 2019.Both behemoths took a hit. For most of 2017, consumer micro lending was a lucrative business for Ant, accounting for almost 20% of the group’s income, Bernstein Research estimated. But that cash cow’s milk turned sour that December, when Beijing suspended all unsecured online cash loans. Ant could no longer offer asset-backed securities exceeding 2.3 times its total capital. Issuing such bonds had been a capital-efficient way for Ant to pass its loan books on to funds.The change was painful. In the fourth quarter of 2017, Alibaba Group Holding Ltd., which has a one-third equity stake, received a payment of 193 million yuan ($27.6 million) from Ant, down from 2 billion yuan in the three months ending in September. Lufax, China’s largest peer-to-peer lender, also saw seismic changes. Until late 2017, the country’s online financing business was driven by P2P, with total outstanding loans peaking at 1.1 trillion yuan. Regulatory tightening practically killed this model. Nowadays, facilitation — essentially matchmaking — is the norm, with banks accounting for about 45% of online consumption loans, according to CLSA Ltd. estimates. Last July, Lufax substantially scaled back its core P2P business.These IPOs will expose the true state of millions of consumer balance sheets. Thanks in part to the rise of companies like Ant and Lufax, Chinese are no longer debt-free. At the end of last year, household debt totaled more than 60 trillion yuan, or 62% of gross domestic product. Their ability to repay is worsening. Data from the central bank show that while consumption loans drawn from financial institutions rose over 13% in June from a year earlier, disposable incomes are shrinking, unemployment is rising, and the cash flows of borrowers are looking smaller.Investors may find that the picture wasn’t all rosy, even before Covid-19. For instance, Qudian Inc., a smaller lender, noted that its D1 delinquency rate, a real-time representation of its portfolio asset quality, rose to 13% at the end of last year from 10% in the previous three months. Sure, financial distress at Qudian’s customers might appear minor in the bigger picture, but it could seem much less idiosyncratic when public offerings reveal such details from Ant and Lufax. They respectively account for 32% and 13% of online lending, according to CLSA. It’s not clear why Beijing would want to let these two cats out of the bag. The coronavirus will muddy the waters further, especially for those seeking to borrow online. Asset-backed securities sponsored by banks did better than those by finance companies, potentially reflecting the less-prime nature of the latter’s customers. A significant increase in delinquencies may leave online lenders short of capital. There will be lasting pain.Six-year-old Ant was once known as the firm that threatened the stranglehold of China’s giant banks. One of its main offerings has been the systemically important money-market fund, Yu’e Bao, which has more than 600 million Chinese investors. Lufax had 44 million customers on its platform at the end of 2019, with 347 billion yuan of their assets under management. Its loan book stood at 462 billion yuan, up 23.3% from a year earlier. If the two firms had waited a few more years, they wouldn’t have to explain the awkward period of 2018 and 2019. By allowing early investors and company insiders to cash out now, Ant and Lufax will lay bare the ugly side of China’s financial industry. Foreigners will be sifting through the prospectus of each offering, wondering what China’s subprime consumers look like in the Covid-19 era – and for years to come.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- A new index focused on China’s technology giants is set to give investors greater access to their growing dominance in Hong Kong’s market.The Hang Seng Tech Index, which launched Monday with backdated prices, tracks the 30 largest tech companies listed in the city, including Tencent Holdings Ltd., Alibaba Group Holding Ltd., Meituan Dianping and Xiaomi Corp. Tracking the gauge this year would have returned 44% for investors, versus a loss of 13% for the Hang Seng Index. The tech measure fell 1.3% Monday.“All the conditions are now ready for large China tech stocks whether in China or already listed elsewhere,” Vincent Kwan, chief executive officer of index compiler Hang Seng Indexes Co., said on Bloomberg Television Monday.The move comes at a time when further listings of Chinese technology firms are in the pipeline, such as Jack Ma’s Ant Group, following those of NetEase Inc. and JD.com Inc. Listing closer to home has become more attractive as tensions between Washington and Beijing threaten to curtail Chinese companies’ access to U.S. capital markets.The compiler of the Hang Seng Index has already embraced change through moves such as scrapping a weighting limit for dual-class shares on some of its gauges. The tech index is seen helping investors bridge a gap between a Hong Kong benchmark overstuffed with old economy banks and insurers, and the technology companies that have emerged as big winners in the city’s beaten-down market.“There are too many laggards in the Hang Seng Index,” said Castor Pang, head of research at Core Pacific-Yamaichi International Hong Kong. “With overseas-listed Chinese firms deciding to list closer-to-home, the Hong Kong market falls short in terms of having a representative index for these stocks. This new index serves to fill this gap and drive capital flows.”Citi analysts led by Pierre Lau wrote in a recent note that the index will attract investors to other Hong Kong tech stocks, facilitate the issuance of index-linked funds and derivatives as well as boost turnover at Hong Kong Exchanges & Clearing Ltd. That stock is up 40% this year, most in the Hang Seng Index.Supported by strong mainland inflows through stock connect links, Chinese technology shares have emerged as big winners in Hong Kong this year. Tencent has surged 38% while Meituan is up 82%.The Hang Seng Index, on the other hand, has underperformed. Nearly half of its members have fallen at least 20% this year.Morgan Stanley sees the new technology gauge providing a bigger sentiment boost near-term to the MSCI China Index than the Hang Seng, which has few components that will also be in the tech index. “The direct stock-level positives cannot translate into a meaningful index-level boost,” analysts led by Laura Wang wrote.(Updates Monday’s prices throughout)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Credit Suisse Group AG invested nearly $100 million in Ant Group during its last funding round, according to people familiar with the matter, setting the Swiss bank up for a potential windfall as the Chinese internet giant prepares to go public.The Zurich-based lender, a frequent adviser on deals across Jack Ma’s empire, made the equity investment during Ant’s 2018 fundraising, which valued the company at $150 billion. Credit Suisse stands to make paper gains on the previously undisclosed investment if the offering gets a strong reception. One estimate from Bernstein projected Ant’s valuation at $210 billion, meaning a 40% increase from the earlier investment level.The bank doesn’t plan to sell its stake, the people said, requesting not to be named because the matter is private. A representative for Credit Suisse declined to comment. Ant declined to comment via email.Credit Suisse joins a growing number of banks from Goldman Sachs Group Inc. to China International Capital Corp. in investing in private companies, particularly those in the technology sector. The investments hold the promise of generous returns at a time of intensifying competition and thinning fees for underwriters. Credit Suisse has also invested in L&P Cosmetics Co. in Korea and Hero Fincorp Ltd. in India.Ant, the crown jewel of Ma’s Alibaba empire, has said it plans to pursue a simultaneous dual-listing in Hong Kong and on the Shanghai stock exchange’s STAR board. Alibaba Group Holding Ltd. owns a third of Ant.Ant is leaning toward giving Credit Suisse the smaller role of joint global coordinator for its Hong Kong IPO after the bank was left off an initial list of sponsors for the deal, people familiar have said.Credit Suisse advised the Alibaba independent committee when the company bought a 33% stake in Ant, and did not advise on Ant’s latest fundraising round, people familiar have said. The four banks that did got priority in getting a role as an IPO sponsor, they said.Credit Suisse has worked closely with Ma’s empire over the years, handling at least 30 deals within the larger Alibaba ecosystem, according to people familiar. The bank has also advised Alibaba on at least $14 billion of acquisitions, more than any other bank, according to data compiled by Bloomberg.Credit Suisse was not among the group of investors disclosed during Ant’s 2018 funding round. Ant said it raised about $14 billion from backers including GIC, Khazanah Nasional Berhad, Warburg Pincus, Canada Pension Plan Investment Board, Silver Lake, Temasek Holdings Pte and Carlyle Group.(Updates with Credit Suisse’s role for Alibaba independent committee in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Huawei Technologies' [HWT.UL] founder Ren Zhengfei's global ambitions are marked in bricks and mortar at a new company campus in southern China, where the buildings are replicas from European cities. Zhang Yiming, founder of ByteDance, the operator of short video app TikTok, has plastered his Beijing headquarters with posters including a cover of former Google CEO Eric Schmidt's book "How Google Works", and has long said he will build a global firm that can compete with U.S. tech giants.
An Indian court has summoned Alibaba <BABA.N> and its founder Jack Ma in a case in which a former employee in India says he was wrongfully fired after objecting to what he saw as censorship and fake news on company apps, documents seen by Reuters showed. The case comes weeks after India cited security concerns in banning Alibaba's UC News, UC Browser and 57 other Chinese apps after a border clash between the two countries' forces. Following the ban, which China has criticized, India sought written answers from all affected companies, including whether they censored content or acted for any foreign government.
(Bloomberg) -- Zhang Yiming is the little-known Chinese entrepreneur who built TikTok into one of the most promising franchises on the internet. Now the brainy, combative 37-year-old is under pressure to save the business from Trump administration threats.Venture investors in TikTok parent ByteDance Ltd. have approached Zhang with a range of proposals to address U.S. concerns that the short-video app is a security threat, according to people familiar with the matter. They include selling a majority stake in TikTok to American interests, perhaps strategic investors or the venture firms themselves, said the people, asking not to be identified because the talks are private.Zhang, who controls the company, has so far resisted. He’s tried building up TikTok’s operations in the U.S., hiring an American chief executive officer and reassuring regulators that user data will not be shared outside the country. TikTok has also stepped up its lobbying in Washington, D.C., signaled it would create 10,000 jobs in the country and created a $200 million fund to support U.S. stars.It hasn’t been enough. This month, Donald Trump said he’s considering banning the app in the U.S., while adviser Peter Navarro said the app would face penalties for “information warfare” against the U.S. A decision is likely to come before the elections in November so time is running short for Zhang.“We are moving down a path of techno-nationalism,” says Samm Sacks, a fellow on cybersecurity policy and China digital economy at the New America think tank.Trump has the power to cripple the business. The president could add TikTok to the U.S. entity list, which would compel American companies such as Apple Inc. and Alphabet Inc.’s Google to drop the service from their app stores. In addition, the U.S. Committee on Foreign Investment in the U.S., better known as CFIUS, is reviewing ByteDance’s 2017 purchase of the business that became TikTok and could force a spinoff. Either move would hammer the value of the business.That has people close to Zhang stepping up their push for quick action to preserve the value of the franchise. Here is a look at several scenarios for Zhang, ByteDance and its investors to save TikTok.Sell TikTok to U.S. investorsByteDance’s venture investors, including Sequoia Capital, have urged Zhang to sell a majority stake in TikTok. The idea is that TikTok could become a U.S. company, while ByteDance retains a minority stake. This scenario has been discussed for months with various iterations, including a group of venture firms or strategic partners buying the additional equity, according to one person involved in the talks.Talks are detailed enough that they’ve debated whether ByteDance should continue to hold any board seats and whether U.S. authorities would likely back off, the person said. Neil Shen, the head of Sequoia China who backed the startup early on, has supported this idea. Sequoia declined to comment.“Since publicly announcing two weeks ago that we are evaluating changes to the corporate structure of the TikTok business, there have been numerous suggestions made by external people not involved in the company’s internal discussions,” TikTok said in a statement. “We do not comment on rumours or speculation. We are very confident in the long-term success of TikTok and will make our plans public when we have something to announce.”The biggest hurdle to such a deal is Zhang’s desire to keep control of TikTok. He has resisted because he thinks the service is evolving into one of a handful of major online advertising businesses, alongside Facebook Inc. and Google. He has already endured a TikTok ban in India, its largest market by users. His instincts are to fight. He has scrapped with the authorities in Beijing over politically sensitive content and with Chinese publishers over allegations of copyright infringement.Price is another challenge. TikTok’s value is surging, with estimates ranging from $20 billion to $40 billion. The real promise is in the future if it can follow the growth path of Facebook or Google. It’s not clear venture investors, which also include General Atlantic and SoftBank Group Corp., could raise enough capital to buy a majority stake at a price that would satisfy Zhang, one person said.Any deal would also face enormous risks because time is running short. Buyers may have to agree to a deal with ByteDance without knowing whether the U.S. government would then forgo a ban. One venture investor said it’s essentially impossible to complete a deal in time.Sell Just TikTok’s U.S. businessA more modest scenario under discussion is separating TikTok’s U.S. operations, while ByteDance retains full ownership in the rest of the world, the person said. This would make the deal more affordable for venture firms and would allow Zhang to retain control over most of the operations. It may also assuage U.S. regulators because user data would be under the control of a local company.The U.S. is a relatively modest part of ByteDance’s overall business. The TikTok app has been downloaded more than 165 million times in the country, according to Sensor Tower estimates, compared with more than 2 billion times globally, including its Chinese equivalent.The drawback of a U.S. TikTok is that the operation would lose the synergies of a global company. Advertisers that have flocked to the service would have to deal with two different entities. Engineers working on TikTok’s software may also struggle to deal with user bases that are segmented into different geographic regions. If the U.S. business continues to use algorithms and intellectual property from Beijing headquarters, American politicians may still have concerns over security.Split ByteDance into China and everywhere elseA more dramatic alternative would be for Zhang to separate ByteDance in China and abroad. In theory, he could set up a global headquarters in the U.S. or the U.K. to run all of ByteDance’s businesses outside of his home country. Although his company is best known for TikTok, it is an ambitious software developer, with popular smartphone apps for news, entertainment and more. Such a separation would proactively address concerns about Chinese control over ByteDance’s entire family of apps.The company’s China business, already substantial, is growing fast. The domestic version of TikTok, Douyin, is a bigger business than the short-video service has outside the country. ByteDance is also expanding in the country into new services, including education.Make ByteDance an American companyPerhaps the most unlikely option would be for Zhang to move to the U.S. and run ByteDance from there. The native of Longyan has spent an increasing amount of time in California in recent years as ByteDance has expanded abroad. The U.S. visa programs for exceptional workers would almost certainly cover the founder, meaning he could become a citizen in less than a year, one person said. Parallels would be Rupert Murdoch or Elon Musk, the person said.Such a move would be very controversial in his home country. Chinese who move abroad typically keep a low profile to avoid becoming a lighting rod.TikTok has already hired former Walt Disney Co. executive Kevin Mayer as chief executive officer and he also serves as chief operating officer of ByteDance.“TikTok is led by an American CEO, with hundreds of employees and key leaders across safety, security, product, and public policy here in the U.S.,” a company spokesperson has said. “We have never provided user data to the Chinese government, nor would we do so if asked.”Navarro has said that selling TikTok to American buyers wouldn’t be enough.“If TikTok separates as an American company, that doesn’t help us,” he said this month. “Because it’s going to be worse -- we’re going to have to give China billions of dollars for the privilege of having TikTok operate on U.S. soil.”In the end, Zhang may opt to do nothing and deal with Trump’s decision after it’s made. ByteDance is already the most valuable startup in the world, according to CB Insights. Its valuation, $75 billion during its last official fundraising, surged to as much as $140 billion in private share transactions earlier this year, according to one person close to the matter.While a U.S. ban on TikTok would hurt that lofty total, ByteDance’s valuation would likely remain above $100 billion, the person said. Clarity would also allow the CEO to focus on building the next major competitor on China’s internet, beside Tencent Holdings Ltd. and Alibaba Group Holding Ltd. Investment bankers have pitched Zhang for months on an initial public offering, despite the U.S. threats, because investors are so hungry for new offerings. That’s a sign of the business’s stability, even though the company has said it’s in no rush to go public.(Updates with TikTok’s new $200 million fund in third paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
China's Alibaba Group Holding Ltd <BABA.N> is seizing on a new business opportunity thrown up by the novel coronavirus: helping foreign universities skirt China's stringent internet controls to keep classes going for their mainland Chinese students. Many Chinese students returned home after the virus prompted campuses to shut and have difficulty watching live-streamed tutorials or accessing class materials due to the so-called Great Firewall. University associations told Reuters that, soon after the virus started spreading globally, Alibaba's cloud division met with member institutions and pitched access to a network that could be established within 48 hours and act as a bridge between universities' portals and mainland Chinese students.