Homepage / Asia / A giant state-owned Chinese firm is attracting the attention of big investors
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election

Asia

A giant state-owned Chinese firm is attracting the attention of big investors

Giant state-owned telecom China Unicom said Sunday that talks with potential strategic investors are ongoing and that no binding agreements have yet been reached.

That follows reports last week that a number of private tech giants, including Baidu and Tencent, would jointly invest $12 billion into the company. That would represent much more than just a simple round of investment into a telecom: Domestic and international investors are watching the company closely for what it says about the future of the Chinese economy.

China Unicom is on a list with a handful of other state-owned firms that Beijing is trying to reform by attracting private capital, employing a mixed ownership structure. What Unicom eventually does could serve as a model for reforming China’s 150,000 state-owned enterprises, which hold more than 100 trillion yuan in assets, according to the State Council.

Cleaning up China’s inefficient, wasteful state-owned enterprises (SOEs) “is the most important reform for the long-run health of China’s economy,” said Julian Evans-Pritchard, China economist at Capital Economics. “It’s the state sector that is holding back the economy, and [adding] to the crazy build-up of debt.”

Although debt has plenty of economists worried, institutions have continued to lend to state-owned firms. Because they’re government-backed, “‘we don’t have to worry they’re safe,'” Evans-Pritchard said. “That’s the key assumption … China is in an unusual situation — in most countries, you would have had a crisis by now.”

Speculation over policy to revitalize and bail SOEs out has affected investor sentiment much more than traditional fundamentals like company earnings performance, he said. In fact, at those firms the “profit margin has declined further while global peers have improved,” wrote Denis Prouteau and Alicia Garcia Herrero of Natixis in a recent note.

The SSE 50 index, which tracks the 50 largest state firms traded in Shanghai, is up about 13 percent so far this year, according to Reuters data. That easily tops the performance of non-governmental tech firms — the ChiNext price index, a tech-heavy board filled with start-ups in Shenzhen, has tumbled nearly 14 percent this year.

The idea of mixed ownership reform is that private money and expertise can help a company turn things around. But private firms getting into mixed ownership schemes also need to make sure SOE debt doesn’t taint their own balance sheets. They’re going be looking at how to justify the investment with projected returns and setting an exit strategy to deploy at some point, said Alex Ng, vice president at China Merchants Securities.

Beijing has also been engineering giant mergers to allow only the strongest firms to remain. It has even considered putting SOEs under government financial holding companies and aiming to maximize returns — much like what Singapore currently does

Still, experts remain skeptical and say the government is avoiding the necessary, but painful step: letting underperforming state firms default in order to allow resources to move to more productive functions.

That’s because the government likely doesn’t want to lose its grip over certain industries. China “probably wouldn’t have been able to achieve the growth they had in the first half of this year, for example, without the degree of control they have over the state sector,” said Evans-Pritchard, noting that it’s getting harder to push for economic growth that way.

Also, with more than 30 million people employed by China’s SOEs, there are concerns about retraining them and finding new jobs to prevent social unrest.

Japan was in a similar situation, but the main difference is that it “was much richer when it reached this point,” Evans-Pritchard said.

“That’s the scary thing about China — it’s heading in a similar trajectory, but at a much earlier stage in terms of its economic development, in terms of income levels,” he said. “If they don’t deal with this problem, they [risk] falling into the so-called middle-income trap, where growth becomes very sluggish before they reach high income levels.”

China Unicom stock was up about 0.5 percent in Hong Kong morning trading on Monday.

Source: cnbc china
A giant state-owned Chinese firm is attracting the attention of big investors

Comments are closed.