10.49k followers • 18 symbols Watchlist by Motif Investing
Chinese internet companies grow their users bases and their ability to monetize them, could result in rapid revenue and earnings growth.
Vipshop Holdings Limited
Bitauto Holdings Limited
Jumei International Holding Limited
Fang Holdings Limited
(Bloomberg Opinion) -- All of a sudden, bond traders are crossing paths with short sellers, and things are getting messy. Bringing them together is a growing list of Chinese corporate accounting scandals. Last week, Luckin Coffee Inc., a target of short seller Muddy Waters Research, admitted its chief operating officer may have fabricated billions of yuan in sales. Days later, TAL Education Group said an internal audit found an employee wrongly inflated revenue. Muddy Waters also said it's shorting shares of iQiyi Inc., tweeting that it believes the Netflix-like streaming service is a “fraud.” The company, backed by Baidu Inc., said the report contains “numerous errors.” At first glance, this is a story about stock investors’ irrationality and greed. These high-flying companies were cut off from the more analytical bond world, because they don’t have much by way of cash flow or tangible assets. At best, a few financially savvy ones like Luckin and iQiyi were able to issue convertible bonds, which are equity-linked instruments. But we’re talking about China, where corporate family trees matter, and stock holdings are often pledged away as collateral for loans. Now this web of hidden debt is ensnaring the bond market. Dollar bonds issued by Car Inc. — whose chairman Lu Zhengyao, or Charles Lu, is Luckin’s largest shareholder — have tumbled to deeply distressed levels.While Lu’s car rental business has nothing to do with Luckin’s coffee shops, it may well share similar financing techniques, investors figure. Lu, it turns out, is a big user of pledged shares. He has taken out hundreds of millions worth of margin loans from Wall Street’s most prestigious banks. With Luckin tumbling over 80%, he’s no doubt getting margin calls. Lenders have seized $335 million worth of shares as of Monday.For Luckin, margin calls will only hammer the share price; for Hong Kong-listed Car Inc., they could lead to a default. If the combined holdings of Lu and related parties — currently at 56% — drop below 35%, that could trigger a change of control clause for the company’s two dollar bonds with over $670 million outstanding, and force early redemption. But Car Inc. doesn’t have that kind of money: With a cash ratio of only 0.74, it can’t even cover existing short-term debt.Because of a lack of disclosure in Hong Kong, we have no way of knowing how many Car Inc. shares Lu has pledged and may have to sell. But there’s good reason to believe he wouldn’t act any differently with his other businesses. Car Inc.’s largest shareholder, UCAR, which Lu controls, has put up 24% of shares outstanding for 1.4 billion yuan of bank loans as of last June, according to S&P Global Ratings. So the only rational thing for bond traders to do is to cut their losses. Meanwhile, convertible bonds can throw out nasty surprises, too. China Inc. sees these instruments as dirt cheap loans meant to become stocks — except when things get derailed by short sellers.Consider iQiyi. It has two convertible bonds, with $750 million redeemable as early as December 2021 and another $1.2 billion in 2023. Both are deeply out-of-the-money right now. Will Baidu, the controlling shareholder, bail out iQiyi when the principal comes due? The bid-ask spread of bonds issued by Baidu widened Wednesday, as traders tried to process what this would mean for the investment-grade search engine, or whether iQiyi could trigger cross-defaults. Any time a stock dips, appetite for an affiliate company’s credit also suffers. In China, however, the relationship is more direct and consequences more brutal. Credit has always been tight for private businesses, so they can never have enough of it. That’s why they turn assets — land, factories, stocks, even the apartments they live in — into new credit at every opportunity. As a result, there’s no pecking order, stocks become debt and the two worlds converge. Muddy Waters just opened a Pandora’s box.This column does not necessarily reflect the opinion of 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.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 Opinion) -- Smartphones are a daily necessity, weddings will still go ahead, and enterprises will embrace digital upgrades. Those are just some of the justifications that Chinese technology companies such as Xiaomi Corp., Baidu Inc. and Tencent Holdings Ltd. have for telling us that the worst may be behind them as the country gets through the Covid-19 pandemic. That’s a risky tone to take. A global recession is upon us, and they’re not fully taking it in.China is looking at the reopening this week of Wuhan, the epicenter of the outbreak, after months of lockdown and seeing it as a sign that things are getting better. The messaging is obvious: China is back in business, and its domestic companies are in the clear.But the rest of the world sees a different picture: New York and Milan resemble ghost towns, Tokyo is facing a state of emergency, Manila is under curfew, and Singapore just banned gatherings. “Smartphone demand is resilient; it’s a daily necessity so demand will rebound quickly,” Xiaomi Corp. Chief Financial Officer Chew Shouzi said in a media teleconference March 31. “We are cautiously optimistic about smartphone demand in overseas markets when the epidemic is controlled.”Overseas markets are not OK. Millions of consumers around the world will be left without the ability to pay rent or buy food. Smartphones aren’t likely to remain on the must-have list.All told, more than 1 billion workers are at risk of a pay cut or losing their jobs, the International Labor Organization warns. In the space of just two weeks, the U.S. stunned economists with a record 10 million people filing for unemployment benefits. That may not seem like much in a world of 7.8 billion, yet America remains the world’s largest economy and each of those now jobless is a consumer who carries a lot more spending power than most global citizens. In China, it’s going to be difficult for even domestically focused enterprises to avoid any impact. While Xiaomi sounds optimistic, its biggest competitor is more cautious. Huawei Technologies Co., which gets more than half its revenue from handsets and mostly at home, recently told reporters that 2020 will be a challenging year but that it’s too early to make a forecast.Tencent Holdings Ltd. has a taken a pragmatic approach to preserving its bottom line as revenue declines: cutting costs. Still, every yuan it’s not spending on marketing is one not flowing to other internet and media companies that depend on advertising sales to run their businesses. The social-media and online-games company is confident it can offset any short-term weakness with a push into new services, like cloud computing.China’s coronavirus outbreak helped boost demand for Tencent’s enterprise products, part of a long-term trend, President Martin Lau told investors last month. While that may be true, it won’t help much if thousands of companies cut staff or even cease to operate.That’s a real possibility. Chinese gross domestic product growth could slow to 1.5% for 2020, pushing the labor market to its toughest situation in 20 years, Wang Tao, chief China economist for UBS AG, said in a note to clients this week. Instead of urban employment growing by 10 million annually as in recent years, the figure may decline by a few million. Downward pressure is likely to continue for China’s international trade, pushing exports down 12% for the full year, she wrote.China remains at the center of global technology manufacturing, and the outlook has deteriorated markedly. Researcher IDC Corp. just cut its 2020 forecast for global information technology spending growth to minus 2.7% from 5.1%. Beyond the drop in economic activity, many purchases will be delayed or cancelled purely due to the uncertainty surrounding the pandemic’s conclusion.Hon Hai Precision Industry Co. posted a 12% drop in first-quarter revenue. The Taiwanese company employs up to 1 million people in China to churn out smartphones, games consoles, servers and consumer electronics. If demand for gadgets like Apple Inc.’s iPhones falls, the need for those workers disappears, and with it their spending power. That same scenario will play out for auto workers, garment makers, and machinery operators.The flow-on effect from declining exports will be unavoidable. As my colleague Anjani Trivedi wrote last week, the country’s stimulus measures are paltry compared to what’s being meted out in the rest of the world.That means domestic consumer markets may not be a haven. Millions fewer people will have the disposable income to shop on Alibaba Group Holding Ltd.’s Taobao marketplace, or JD.com’s online outlets. They won’t be able to afford games or the products advertised on them, and many will need to tighten their belts when it comes to home delivery or eating out.Chinese technology companies have spent the last few months adjusting to consumers who are stuck spending their money from home. They’ll soon need to grapple with the reality of customers caught with no money to spend at all. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.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.
Sohu.com (SOHU) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
The pressure is growing across the globe to go green, and one ambitious ride-sharing service has risen up to the challenge in a big way
Zacks.com featured highlights include: The Trade Desk, Sina, Casella Waste Systems, Cinemark and National Oilwell Varco
Figuring out bloated toxic stocks on a consistent basis and discarding them at the right time is important for safeguarding your portfolio.
AI companies have immense potential to aid in surveillance and antidote search amid the coronavirus outbreak. Here are three stocks to keep a close watch on
Momo Inc. (NASDAQ:MOMO) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the...
(Bloomberg) -- China’s consumers are shopping online again. But their purchases signal they plan to stay indoors for the foreseeable future, dashing hopes for a spending recovery as the nation contemplates its post-virus world.Lunch boxes saw 120 times more searches in the last 30 days as the virus pushes people to prepare their own food even after returning to the office, according to March 26 data from Index.1688, which collects information from Alibaba Group Holding Ltd.’s shopping sites.Portable tableware, foldable spoons and work clothing also surged in popularity, while items typically given as gifts or used for travel and outdoor activities haven’t shown signs of recovery.Yoga mats and hula hoops for home exercise also climbed in demand, a bad sign for gyms waiting for the return of patrons.The data undermines predictions of a V-shaped recovery in the world’s biggest consumer market that has seen more than 80,000 infections and 3,000 deaths from Covid-19. While big operators like Starbucks Corp. and Yum China Holding Inc. have been reopening outlets, they face a public that’s preferring to stay home after work and continue to social distance, even though official data indicates China’s number of new infections fallen to zero.China’s experience may prove an important indicator for how the rest of the world recovers. Even after outbreaks are contained, lingering fear is likely to change consumer behavior for longer than expected.“Consumers are still cautious about going out and many of those venues are not yet back to full working mode,” said Jason Yu, Shanghai-based general manager of Kantar Worldpanel. Items for a return to work, such as instant coffee, hair and skin-care products, are recovering ahead of the market, he said.Other products to post a spike in searches include contact-less thermometers, suits and stationery, according to Index.1688.A report by JD.com Inc.’s research center also shows work-related consumption speeding ahead of other categories. China’s second-largest e-commerce company sold five times more lunch boxes in late February than a month earlier, while powerbanks, office equipment and stationery are also high up the list.“Consumption of staples is clearly outshining discretionary or luxury goods in what is still very much a lukewarm and uneven recovery,” Ned Salter, head of global research at Fidelity International, said in a statement. “We need to see more consumer confidence to sustain the improvement and that will depend on how well China deals now with imported cases to contain the virus fully.”A Coronavirus Vaccine in 18 Months? Experts Urge Reality CheckRetailers in China have been cautious in their forecasts since the virus emerged.Yum China Holding Inc., which operates KFC and Pizza Hut in the country, has said the second quarter will be “challenging” and patience is needed. Anta Sports Products Ltd., the country’s biggest sportswear maker, forecasts the first six months of 2020 will be “tough throughout”.About 60% of listed restaurant operators in China are at risk of running out of cash within six months, according to data compiled by Bloomberg and company reports.With the food and beverage industry reeling, local governments are trying to boost consumption by urging officials to dine out in restaurants and shop in malls. Vouchers are being given out by cities including Hangzhou and Nanjing as well as shopping platforms Meituan Dianping and Suning.com Co. to spur spending.While China’s new infection numbers have plunged, the pandemic is widening globally with cases worldwide now topping 786,000 and more than 37,800 dead. Chinese factories are experiencing a second shockwave as western clients cancel orders en masse.Luiz Chen, a 31-year-old auditor in Guangzhou, recently bought moisturizing masks and a new dress before returning to the office but said she won’t be treating herself to anything expensive after her employer froze bonuses for the past two months.“I’m scared to get a salary cut or even lose the job,” said Chen. “Economic crisis seems not far away. How can I have the good mood to buy buy buy?”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.
One thing we could say about the analysts on Momo Inc. (NASDAQ:MOMO) - they aren't optimistic, having just made a...
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
If you own shares in Fang Holdings Limited (NYSE:SFUN) then it's worth thinking about how it contributes to the...
Is Autohome Inc. (NYSE:ATHM) a good dividend stock? How can we tell? Dividend paying companies with growing earnings...