US blocks out the sun for Chinese solar panel maker
Shutting out Chinese solar producers from the lucrative US market is as damaging to them as blocking out the sunlight. The US Department of Commerce on July 5 determined a new set of anti-dumping duties on solar products from China and Taiwan, with rates as high as 165.04%, adding to anti-dumping levies imposed in June. The move puts the Chinese solar sector in the shade. “We believe most of the Chinese solar producers will guide down their shipment due to the loss of US market, particularly Trina Solar (TSL.NYSE), Renesola (SOL.NYSE), Jinkosolar (JKS.NYSE) and Suntech (STPFQ.PNK),”Macquarie Securities said in a note this week. Chinese solar manufacturers could look for a sizable market to replace the US or relocate their production base to other countries, but both would take time. Chinese domestic demand is also not helpful due to limited quotas for installing solar farms and challenges to develop distributed power projects. Despite the government’s efforts to increase capacity, Macquarie Securities expects the publishing and implementation of policy to expand capacity to take 3-6 months, making it irrelevant in the near term. Macquarie Securities said they prefer China WindPowerGroup (0182.HKG) and China SingyesSolar Technologies (750.HKG) and investors should be cautious on Yingli Green Energy (YGE.NYSE), Trina Solar (TSL.NYSE), and GCL (3800.HKG).
Who else loves China’s car boom? Toll road operators
Toll road operators just can’t love an auto boom much more. As cars count on expressways for a swift ride to their destination, toll road operators put up barriers and enjoy rocketing revenues. Chinese people may complain about increasing traffic jams and fewer parking spots due to the surging number of cars on the road, but toll road operators are just as happy as auto makers when car demand surges. Riding on an auto boom, they’ve seen growing traffic on their expressways. More and more people taking holidays in the first half of 2014, such as the Spring Festival and Qingming, have also contributed to soaring revenues. Most major toll road operators have announced their first half operating data, based on which UOB Kay Hian estimates that firms should book 4-18% year-over-year toll revenue growth for that period. UOB Kay Hian holds an optimistic outlook for the Chinese toll road sector. Analysts there have a “BUY” rating on Jiangsu Expressway (0177.HKG), Zhejiang Expressway (0576.HKG), Shenzhen Expressway (0548.HKG) and Anhui Expressway (0995.HKG).
Being friends with the cool kids could make you popular
It occurs repeatedly in TV dramas that high school kids try hard to make friends with the cool kids in school in the hope of making themselves popular. Well, this could hold true for the Chinese internet sector. Sogou’s friendship with Tencent (0700.HKG) has given it some much needed street cred. Sogou, the search and internet service provider of Sohu (SOHO.NASDAQ), launched an exclusive search engine for content generated on Tencent’s vastly popular WeChat platform. This is the first time for WeChat to open its contents to a third-party search engine, and Sogou’s link with Tencent’s messaging service provider soon worked its magic: Sogou’s search traffic grew by 30% after the launch of this function. Driven by strong revenue growth, Sogou is profitable for two consecutive months. “Sogou’s development on PC is also solidified by WeChat search, which enables it to adopt a differentiation strategy relative to its competitors,” Yuan Ma, an analyst at BOCOM International, said in a note this week. Adding on top of money-spinning Sogou, mobile ad and video ad are driving further revenue growth at Sohu.
Despite the unfavorable cost structure of the video industry and falling game revenue due to transformation of Changyou, BOCOM International sees a healthy outlook for Sohu.
Pork producer WH Group (288.HKG) is going to try again with its IPO on August 5 after pulling its offering earlier in the year.