Tuesday Tech Briefing: Ant Financial, New Frontier, E-Commerce Law
DEALS AND FUNDRAISING
1. Meituan-Dianping Pares Operating Loss on Booming Revenue
What: Meituan-Dianping cut its operating loss to 3.8 billion yuan ($584 million) in 2017 from 6.3 billion yuan in 2016, the company revealed in the draft prospectus for its Hong Kong initial public offering (IPO). Meanwhile, revenue jumped to 34 billion yuan from 13 billion yuan. Meituan is targeting a $6 billion flotation at a valuation of about $60 billion in its Hong Kong IPO, Bloomberg News reported.
Why it's important: Meituan is the world’s largest on-demand delivery network by number of deliveries. As rival firms are pulling out all the stops in a capital-intensive battle for online spending, the internet company is turning to public markets to raise cash. In its prospectus, Meituan said it plans to use about 20% of the proceeds to “selectively pursue acquisitions or investments” that complement its business, while upgrading its technology and developing new products and services. (Source: Caixin)
2. New Frontier to Raise $230 Million in New York IPO
What: Fund management company New Frontier Corp. has set the final pricing for its New York IPO in a deal expected to raise $230 million. It has priced its American depositary shares at $10 each, with plans to sell 23 million. The shares are scheduled to start trading in New York on Thursday.
Why it's important: The newly incorporated company, which will focus on China’s health care, education and technology sectors, is led by Carl Wu, who helped to build up the Asia operations of private equity giant Blackstone, and former Hong Kong Financial Secretary Antony Leung.
Big picture: The deal comes amid a wave of new listings of China-focused firms in Hong Kong and New York. The company says it believes China’s future growth will be “driven by private sector expansion, technological innovation, increasing consumption by the middle class, structural economic and policy reforms and demographic changes.” (Source: Caixin)
BIG TECH COMPANIES
3. Ant Financial Taps Blockchain for International Remittances
What: Ant Financial Services Group began blockchain-based money transfers between Hong Kong and the Philippines Monday, as part of the Chinese online payment giant's plans to expand real-time cash remittance services globally.
Why it's important: Ant Financial said the service, offered by its Hong Kong joint venture with conglomerate CK Hutchison Holdings, will be the first of its kind in the world. Hong Kong, home to 200,000 Filipino workers, has demand for about $700 million of annual cross-border remittances, and blockchain is expected to cut remittance costs significantly.
Big picture: Blockchain encryption technology has broader applications as a decentralized ledger to ensure secure transactions using conventional currencies. Ant Financial said it may in the future offer the service to users transferring money between the mainland and Hong Kong. (Source: Caixin)
4. LG Display Is Set to Open China OLED Plant, Braces for Competition
What: LG Display Co. is close to starting organic light-emitting diode (OLED) screens production at a new factory in Guangzhou to sell more of the next-generation screens. The Korean display maker will each month manufacture 130,000 OLED plates (which are divided into screens) once it gets China’s approval.
Why it's important: OLED screens are widely used in smartwatches, premium phones and dashboards in luxury autos. LG Display and Samsung, which together make South Korea the world’s biggest OLED supplier, are turning to the next-generation screen technology as competition from Chinese rivals shrinks profits in their older LCD business.
Big picture: Chinese companies like BOE Technology Group Co. are planning to enter the OLED market, although South Korea remains years ahead of China in OLED technology. LG Display’s chief technology officer Kang In-byeong described the rivalry as “Korea versus China.” “It’s fortunate we have something called OLED, and China isn’t yet good at it,” Kang said. (Source: Bloomberg)
5. China's Draft E-Commerce Law May Increase Pressure on Small Platform Operators to Fight Fakes
What: China’s draft e-commerce law may make internet retail site operators directly liable for the sale of counterfeit products on their platforms. Online merchants are currently solely liable when caught selling fake products.
Why it's important: The e-commerce law looks to rid online sales platforms of fake goods and clean up the country’s reputation as a major source of knock-off merchandise. The new law could disproportionately affect smaller online shopping platform operators, which may not have the same capabilities as bigger players when it comes to identifying and removing counterfeit products.
Big picture: China is looking to secure intellectual property rights as it evolves from the world’s bootleg hub to top patent owner. The proposed e-commerce law follows separate programs conducted by Alibaba and JD.com to take down fake product listings on their sites. However, critics have criticized the companies for not doing enough to battle piracy and counterfeiting. (Source: South China Morning Post)
6. U.S. Plans Limits on Chinese Investment in U.S. Technology Firms, Tech Stocks Suffer
What: Wall Street’s main indexes dropped on Monday following reports that the U.S. Treasury Department was drafting curbs that would block firms with at least 25% Chinese ownership from buying U.S. companies with “industrially significant technology.” The Wall Street Journal also reported that the Trump administration wants to block additional technology exports to China.
Why it's important: The Treasury investment restrictions are expected to target key sectors, including several China is trying to develop as part of its “Made in China 2025” industrial plan.
Big picture: The move marks another escalation of President Donald Trump’s trade conflict with China, which raised tensions between the two trade giants and has sent ripples across financial markets and threatened to dent global growth. (Source: Reuters)
Compiled by Hou Qijiang and Qian Tong.
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