KUKA Robotics extends reach into China
A few years back Paris Hilton, that wise sage, set foot in Shanghai and declared the city was “the future.” While her pronouncements are hardly the stuff investors make bets on, she was at least onto something. This week the city became home to a shiny new robotics factory owned by German industrial robots manufacturer KUKA (KU2.ETR). Announcing the new plant on Tuesday, the Augsburg, Germany-based company was quick to reveal a set of multi-million euro deals with the Chinese automotive industry. A total of 1,375 robots have been ordered, with 250 going to Beiqi Automotive Foton Motor, a subsidiary of Beijing Automotive Industry. Gordon Schönell, a Germany-based analyst at Bankhaus Lampe KG, told China Economic Review in an email that this has been a very prudent move by KUKA and that investors are happy with the expansion in China. “The growth prospects for KUKA in Europe are limited. China is currently definitely the market where KUKA has the biggest growth opportunities in particular outside the automotive industry where KUKA has relatively weak market position in China.” He also believes that China still holds big potential for robots and being close to the customer is very important as KUKA can take advantage of lower production and shipment costs and also shorter delivery times. He has a “hold” rating on KUKA. Investors can soon expect to see KUKA expand into other industries China believes will be the stars of the future.
Lifebelt too tight to fit fattest shipyards
Only a few months ago China boldly cast some its ageing fleet of shipbuilders out to sea to die a slow death, but now the captains of policymaking in Beijing are getting squeamish. A sinking ship is still a sinking ship it seems, and the jobs lost if a yard goes down have big political and social ramifications. Earlier this week the central government announced that it would throw “special funds” to ship owners to replace decrepit vessels in their fleets with new, cleaner models. A subsidy of RMB1,500 per gross ton is double what the market was expecting. The news will offer clear support for smaller shipyards and ship owners that operate fleets of smaller vessels, particularly river ships, Lawrence Li, analyst at UOB Kay Hian, said on the phone from Shanghai. But it may not be a huge boost for some of the listed giants such as Yangzijiang (BS6.SGX) as their portfolio is mostly larger vessels, Li noted. The announcement is unlikely to be of much consolation either to China Rongsheng Heavy Industries (1101.HKG), the go-to media example of a vast private enterprise struggling in the troubled sector. The company has an unhealthy balance sheet and has not received and new orders for some time. Beijing will have to loosen up a few notches on its lifebelt to keep it afloat.
Property, coal, wine and yes, bitcoin
Even China Economic Review has grown interested in bitcoin as the digital currency continues spilling onto the mainland and rolling chaotically in every direction. After all, Chinese investment has been a major factor in driving the price from around US$15 at the beginning of the year to over US$1,000 last month. During the past few days, the price of bitcoin in China narrowed nearly to that of overseas markets. Traders had been arbitraging on the price difference between the mainland and elsewhere. They bought bitcoins with dollars, sold for yuan, and then converted back to dollars. They can’t do that anymore as the difference in price has disappeared. But that won’t kill demand around here, not while the capital account remains closed and so few solid investment opportunities exist. Anyone unfamiliar with China’s investment environment should know that mainlanders with money are constantly looking for investments with fast, huge returns. In other words, they are hunting for risk. These have included property, coal mines, tea, wine, art, even cheese, usually resulting in stockpiles and bubbles. Don’t think that bitcoin isn’t just another item on that list. Last week, when the central bank said financial institutions could not conduct transactions in the currency, the price dropped 20%, reflecting the influence China now has on bitcoin. Don’t get caught with bags filled with bitcoins when the Chinese market loses interest and decides to invest in something even more speculative, like ostrich eggs.
IPO watch
Everyone wants in on China’s e-commerce market. Kerry Logistics Network’s IPO in Hong Kong next Friday might be one way to do that. The Hong Kong-based firm said it will be expanding its presence in the Chinese online retail market next year. Yes, that’s the market that was set to grow by 26% year-on-year in September. It’s also the market that saw US$6 billion dollars via one vendor on a single day in November. Some commentators say the listing, worth up to US$284 billion, is a steal. For those that haven’t set up their own rendition on Alibaba’s Tmall yet, Kerry might be easy access. The not-so-hot buy is China Everbright Bank. This is its third try to list in Hong Kong. The company has corralled a large group of cornerstone investors this time to make sure the demand is there, unlike last time, or the time before.