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☆ India can aim lower in its chip dreams
▼ + stars: | 2023-07-05 | by ( Pranav Kiran | ) www.reuters.com time to read: +3 min

BENGALURU, July 5 (Reuters Breakingviews) - India’s semiconductor dreams are facing a harsh reality. After struggling to woo cutting-edge chipmakers like Taiwan Semiconductor Manufacturing (2330.TW) to set up operations in the country, the government may now have to settle for producing less-advanced chips instead. Prime Minister Narendra Modi wants to “usher in a new era of electronics manufacturing” by turning India into a chipmaking powerhouse. Mining conglomerate Vedanta’s $19.5 billion joint venture with iPhone supplier Foxconn (2317.TW) has stalled; plans for a separate $3 billion manufacturing facility appear to be in limbo, Reuters reported in May. Aiming lower could be just what India’s chip ambitions need.

Persons: Narendra Modi, China's, It’s, Ashwini, Robyn Mak, Thomas Shum Organizations: Reuters, Taiwan Semiconductor Manufacturing, Micron Technology, Micron, Taiwan’s, Zion Market Research, Semiconductor Industry Association, Financial, Thomson Locations: BENGALURU, China, India, U.S, Gujarat, Zion, , New Delhi, Taiwan, Washington, Beijing

☆ Meituan's insider AI deal does not compute
▼ + stars: | 2023-06-30 | by ( ) www.reuters.com time to read: +2 min

Meituan describes Light Year as a leading AI innovator in China. Its backers include Meituan CEO Wang Xin and Sequoia Capital China's HongShan fund, which is controlled by a Meituan non-executive director. Meituan is paying out roughly $234 million in cash and covering some $50 million-worth of Light Year's convertible bonds. Interestingly, Meituan's total outlay is roughly equal to the target's net cash position. For investors, understanding this AI deal is no small challenge.

Persons: Wang Huiwen, Meituan, Wang Xin, Robyn Mak, ’, crouch, Eli Lilly, Antony Currie, Thomas Shum Organizations: Reuters, Meituan, Sequoia Capital, Twitter, Thomson Locations: HONG KONG, HK, China

HONG KONG, June 29 (Reuters Breakingviews) - There's plenty to like about Swire Pacific's (0019.HK) Coca-Cola sale. Little wonder Swire's Hong Kong shares rallied as much as 8% on Thursday morning. The Coke sale is refreshing for investors, but only until the rest of Swire Pacific regains its fizz. Upon completion of the sale, Swire Pacific will distribute HK$11.7 billion in special dividends to its shareholders. The company also plans to enter into a 13-year agreement to provide management services to Swire Coca-Cola USA and receive an annual fee of at least HK$117 million.

Persons: Swire Pacific's, Swire, John Swire, Antony Currie, Thomas Shum Organizations: Reuters, HK, Cathay Pacific, Swire, Cola, John Swire & Sons, Cola Europacific Partners, Citi, Cathay, Swire Pacific, Hong Kong, Cola USA, Hong, Thomson Locations: HONG KONG, Hong Kong, China, Cathay Pacific

HONG KONG, June 27 (Reuters Breakingviews) - A government-led buyout signals more uncertainty ahead for a chip industry grappling with oversupply and geopolitics. The state-backed Japan Investment Corp will take over JSR (4185.T), which makes light-sensitive chemicals vital to manufacturing semiconductors, among other things. In recent years, the conglomerate has pivoted from a low-margin business of selling synthetic rubber used to make tyres to focus on semiconductor materials - primarily photoresists - and biopharmaceuticals. Yet JIC's mandate to boost the country’s global competitiveness and its focus on consolidating industries helps to justify the hefty premium. Either way, the government's focus on elevating national chipmaking champions creates fresh uncertainty for JSR's foreign customers like South Korea's Samsung Electronics (005930.KS) and Taiwan Semiconductor Manufacturing (2330.TW).

Persons: Sharp, Eric Johnson, Una Galani, Thomas Shum Organizations: Reuters, Japan Investment Corp, Renesas Electronics, chipmakers, Samsung Electronics, Taiwan Semiconductor Manufacturing, Japan Investment Corporation, Mizuho Bank, Development Bank of Japan, Thomson Locations: HONG KONG, Tokyo, Taiwan, Japan, United States, South Korea, South

☆ India’s $1 bln education buyout is a studied bet
▼ + stars: | 2023-06-21 | by ( ) www.reuters.com time to read: +2 min

MUMBAI, June 21 (Reuters Breakingviews) - The biggest merger in Indian corporate history has opened the door for private equity giant EQT (EQTAB.ST) to enter the country’s education finance market. The deal is touted as the largest ever PE buyout in the country’s financial sector and values Credila at roughly 101 billion rupees ($1.2 billion), or roughly 37 times earnings in the last financial year. The target specalises in education financing for those looking to universities in the United States, the UK and Canada for higher education. The buyers will also inject 20 billion rupees into Credila, which should help give the company, already a market major, an edge over rivals including state-controlled banks and the Warburg Pincus-backed Avanse Financial Services. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Persons: HDFC, Credila, BPEA EQT, Warburg Pincus, Shritama Bose, Robyn Mak, Thomas Shum Organizations: Reuters, Chrys Capital, Bajaj Finance, Financial, Twitter, Virgin, Thomson Locations: MUMBAI, Swedish, United States, Canada, India, Credila, Cava

HONG KONG, June 5 (Reuters Breakingviews) - Shein is threading the world’s trickiest geopolitical needle. But rising American pressure is forcing it to tweak its business model right as it tries to list there. Last year, its top line surged 46% to $23 billion, per the Wall Street Journal, surpassing $22 billion at H&M and outpacing the 18% growth at Inditex. A Boston Consulting Group report notes that this model allows Shein to keep inventory turnover at just 40 days. That will be expensive; the company's net profit margin was a razor-thin 3.5% last year, according to the Wall Street Journal, far below bricks and mortar rival Inditex's 13%.

Persons: Shein, Bernstein, Chris Xu, Xu, Mubadala, Pete Sweeney, Katrina Hamlin Organizations: Reuters, U.S ., Rivals, Street, Financial Times, Boston Consulting, Morningstar, Securities and Exchange Commission, Wall Street, ’, Singapore, Sequoia Capital, General Atlantic, Thomson Locations: HONG KONG, Zara, China, Inditex, Guangdong, U.S, Xinjiang, Nanjing, Singapore, Mexico, Brazil, India

☆ Pru CFO exit adds urgent task to new CEO’s agenda
▼ + stars: | 2023-05-31 | by ( ) www.reuters.com time to read: +2 min

HONG KONG, May 31 (Reuters Breakingviews) - Anil Wadhwani's honeymoon period as Prudential’s (PRU.L) boss has ended abruptly. Just as he prepares to mark 100 days in the role, his Chief Financial Officer James Turner has unexpectedly resigned after an investigation into “a recent recruitment situation”. Worse, Turner’s previous assignment was as Prudential’s chief risk and compliance offer, a position he held for more than four years. Following China’s reopening, mainland visitors purchasing insurance products in Hong Kong helped boost its quarterly annual premium equivalent, a measure of new sales, by 35% year-on-year in the three months to March. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Persons: Anil Wadhwani's, James Turner, Turner, Katrina Hamlin, Robyn Mak, Streisand Neto Organizations: Reuters, Prudential, Twitter, Toyota, Lufthansa, Thomson Locations: HONG KONG, Hong Kong, London, Saudi, East, Italy

HONG KONG, May 31 (Reuters Breakingviews) - Elon Musk may be China’s most popular American. State media quoted Musk saying the United States and China share “inseparable” interests and that Tesla opposes decoupling. This all provides the $638 billion Tesla with good political cover in the world’s largest automobile market. But for now Beijing and Musk are getting what they want out of the arrangement, and that means it is likely to endure. Reuters GraphicsFollow @petesweeneypro and @KatrinaHamlin on TwitterCONTEXT NEWSTesla Chief Executive Elon Musk visited China on May 30 for the first time since 2020.

Persons: Elon, Qin Gang, Musk, Xi Jinping, Elon Musk, Apple's Tim Cook, JPMorgan's Jamie Dimon, Laxman Narasimhan, Robyn Mak, Thomas Shum Organizations: Reuters, Foreign, Chinese Communist Party, Tesla’s, Twitter, CCP, SpaceX, Starbucks, Thomson Locations: HONG KONG, Beijing, Shanghai, China, Japan, Republic, India, Turkey, People’s Republic, United States, Washington

☆ China thesis lurches from one lazy extreme to next
▼ + stars: | 2023-05-25 | by ( Pete Sweeney | Thomson Reuters | Asia Economics Editor Pete Sweeney Joined Reuters Breakingviews In Hong Kong In September Previously He Served As Reuters' Chief Correspondent For China Economy | ) www.reuters.com time to read: +4 min

HONG KONG, May 25 (Reuters Breakingviews) - Foreigners that once piled into offshore Chinese equities are evacuating as confidence in the country’s economic recovery sags. The China trade has always been unbalanced towards overseas-listed Chinese consumer and internet firms, and foreigners preferred building factories, acquiring large stakes in companies and the like over portfolio trading. Even at a peak in 2021, they held barely over 8 trillion yuan ($1.1 trillion) of yuan-denominated Chinese stocks and bonds, per official data, compared to $27 trillion of American equivalents. Now the former figure has fallen below 7 trillion yuan. Major Chinese indexes in Hong Kong and New York have also slid, with the Nasdaq Golden Dragon China Index having lost around 15% in the last three months.

Foxconn's turnaround efforts initially paid off: by 2018, Sharp was back in the black. Moreover, analysts estimate assembling iPhones and other Apple (AAPL.O) gadgets still brings in more than half of Foxconn’s annual sales. The troubled unit was once a joint venture between Sharp, Foxconn and an entity tied to Gou. The company attributed the slump to a non-operating loss of T$19.7 billion related to its 34% stake in Japanese electronics maker Sharp. Sharp reported a 220-billion-yen ($1.6 billion) impairment loss in the quarter, mostly from buildings, machinery and goodwill relating to display businesses.

The return of tourists to Southeast Asia, he says, bodes well for the group’s core mobility business in the second half. The next challenge is resetting investor expectations so that beats can shine through. Lower incentives helped it to cut its adjusted operating loss to $66 million from $287 million a year ago. It also narrowed its forecast for annual adjusted operating loss to $195 million-$235 million, from a previous forecast of $275 million-$325 million. China’s Alibaba on May 18 reported revenue of 208 billion yuan ($30.1 billion) in the three months to end-March, up 2% year-on-year.

☆ A Sony spinoff comes better late than never
▼ + stars: | 2023-05-18 | by ( ) www.reuters.com time to read: +2 min

HONG KONG, May 18 (Reuters Breakingviews) - A long-awaited Sony (6758.T) spinoff is finally happening. The Japanese video games-to-semiconductors conglomerate may list its financial subsidiary "within the next two to three years" while retaining a 20% stake. Investors promptly bid up shares of Sony as much as 7% on the news. Partially offloading Sony Financial Services, which the company only took full control of in 2020 for $3.7 billion, makes sense. Sony stresses it is not planning any other spinoffs for now - one of them is plenty to look forward to.

☆ India’s airline turbulence will be felt abroad
▼ + stars: | 2023-05-17 | by ( Shritama Bose | ) www.reuters.com time to read: +4 min

India’s Go First has gone into bankruptcy – the country’s second airline to do so since 2019. Its subsequent public and messy spat with engine suppliers and lessors will have ripple effects across the industry and abroad. Go, the country’s third largest airline with a 7% market share, blames Raytheon Technologies-backed (RTX.N) Pratt & Whitney’s “faulty” engines. A global industry association, Aviation Working Group, has put India on a watchlist for violating global conventions on repossession of airplanes. The trouble at Go may not put them off but it promises some extra turbulence ahead.

HONG KONG, May 16 (Reuters Breakingviews) - Investing in China need not be too stressful, provided you avoid investing in Chinese companies. A spending pop in the transport, food and beverage and hospitality sectors helped lift first-quarter GDP to 4.5%. But that data was flattered by comparison to a grim 2022, and April data on imports, inflation and bank loans all disappointed. While Beijing’s crackdowns on domestic technology companies and property developers have eased, other risks are rising. Separately, quarterly revenue at Alibaba is expected to rise 3% year-on-year to 211 billion yuan ($30.5 billion) in the three months to March, according to the average analyst forecast on Refinitiv.

☆ ValueAct loses its temper in 7-Eleven
▼ + stars: | 2023-05-10 | by ( Pete Sweeney | Thomson Reuters | Asia Economics Editor Pete Sweeney Joined Reuters Breakingviews In Hong Kong In September Previously He Served As Reuters' Chief Correspondent For China Economy | ) www.reuters.com time to read: +4 min

HONG KONG, May 10 (Reuters Breakingviews) - ValueAct Capital’s chief Mason Morfit prefers to chide undervalued conglomerates behind closed doors. In its latest 151-page presentation, ValueAct took its case directly to shareholders, the second time it has seen fit to do so in its history. That highlights the U.S. fund’s frustration from its two-year long campaign calling for Seven & i to spin off its 7-Eleven convenience stores, among other things. That implies a standalone 7-Eleven could be worth 10 trillion yen, roughly a quarter more than its parent today. He may have a point, and in truth ValueAct has far more experience turning around technology companies than food retailers.

☆ Beijing expects foreigners to trust, not verify
▼ + stars: | 2023-05-05 | by ( Pete Sweeney | Thomson Reuters | Asia Economics Editor Pete Sweeney Joined Reuters Breakingviews In Hong Kong In September Previously He Served As Reuters' Chief Correspondent For China Economy | ) www.reuters.com time to read: +4 min

In recent months, Chinese investigators have detained employees of U.S. due-diligence firm Mintz Group, visited consultancy Bain & Company and suspended auditor Deloitte’s Beijing operations for three months. Security watchdogs have restricted overseas access to financial data providers like Wind Information, as well as academic database China National Knowledge Infrastructure. Local banks loaned 3.9 trillion yuan ($560 billion) in March alone while corporations issued 328 billion yuan of bonds. Besides Wind, other Chinese data providers including company databases Qichacha and TianYanCha have stopped opening to offshore users, according to three of the sources. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

HONG KONG, May 3 (Reuters Breakingviews) - Chinese travellers are opening their suitcases again, but not their wallets. Domestic travel bookings during the holiday surged eightfold from a year earlier, surpassing pre-pandemic levels, according to online travel agency Trip.com (9961.HK). The return of Chinese holiday-goers should be a huge relief at home and abroad. Before the pandemic, domestic tourism contributed a whopping 11% of GDP and 10% of national employment, according to Fitch. The country's Big 3 carriers - Air China (601111.SS), China Southern (600029.SS), and China Eastern (600115.SS) - are grappling with high oil prices, a weak yuan and geopolitical tensions.

☆ The end of cheap credit could hurry Japanese M&A
▼ + stars: | 2023-05-02 | by ( ) www.reuters.com time to read: +2 min

Diversifying abroad looks attractive to many Japanese companies given weak home markets. The country's third-largest drugmaker by sales is paying a modest-looking 22% premium to Iveric's share price before the announcement. Analysts at Jefferies reckon those sales could top $85 million in its first year and peak at $2.4 billion annually by 2034. Regardless, even Warren Buffett has taken advantage of Japanese rates to funds deals inside Japan; domestic corporations looking abroad will as well. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

HONG KONG, May 2 (Reuters Breakingviews) - Money flowing into the People's Republic is getting uncomfortably hot. Yet recent reversals in New York, Hong Kong and Shanghai suggest that is driven by fickle short-term funds – exactly what Beijing doesn’t want. Reuters Graphics Reuters GraphicsFollow @mak_robyn on TwitterCONTEXT NEWSChinese spirit maker ZJLD shares closed down 18% lower than their initial public offering price on their trading debut April 27. The KKR-backed company raised $676 million in what was the biggest offering in Hong Kong since October 2022. Separately, the Ontario Teachers' Pension Plan, Canada's third largest pension fund, closed down its China equity investment team based in Hong Kong, Reuters reported on April 25, citing sources.

☆ China’s Midea regains outbound deal appetite
▼ + stars: | 2023-05-02 | by ( ) www.reuters.com time to read: +2 min

HONG KONG, May 2 (Reuters Breakingviews) - Midea (000333.SZ), a $58 billion Chinese white goods champion, made waves in Europe in 2016 when it bought German robot maker Kuka for nearly $5 billion. Seven years later, the company is eyeing Sweden’s home appliance brand Electrolux (ELUXb.ST), a complementary asset currently worth around $7 billion including debt. A successful tilt could mark the beginning of a revival in outbound M&A by Chinese firms after offshore deals touched a historic low of $29 billion in 2022, per EY estimates. To close the Kuka acquisition, Midea offered a 36% price premium and generous guarantees including leaving management in place until 2023. Nevertheless, it seems likely that more cash-rich Chinese companies like Midea, seeking to hedge weak domestic demand with overseas customers, will gingerly test cross-border M&A markets this year.

☆ Kirin investors find vitamin deal hard to swallow
▼ + stars: | 2023-04-27 | by ( ) www.reuters.com time to read: +2 min

The $15 billion Japanese company is best known as a brewer, but sources more than half its top line from other businesses. Kirin, led by CEO Yoshinori Isozaki, also reckons the deal will be accretive to earnings per share in the first year. Yet investors immediately wiped some $450 million off the purchaser’s market value on Thursday, almost double the premium it agreed to pay Blackmores’ shareholders. Blackmores may yet show Kirin has adopted a better dealmaking regimen, but investors aren’t holding their breath. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ South Korea's chip dilemma gets sharper
▼ + stars: | 2023-04-24 | by ( ) www.reuters.com time to read: +2 min

China's security review of the $66 billion Micron is largely seen as retaliation against U.S. export controls on chipmaking technology. Yet Yoon has reason to do what America asks at the expense of South Korean companies. Bolstering the security alliance amid rising nuclear risks from North Korea will be on the top of his agenda; negotiating better terms for South Korean electric-car and chip investments into the United States will be another. As the chip war heats up, and threatens to widen, Seoul will find keeping its top two trading partners happy even tougher. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ TPG’s funeral deal is stuck in awkward purgatory
▼ + stars: | 2023-04-24 | by ( ) www.reuters.com time to read: +2 min

MUMBAI, April 24 (Reuters Breakingviews) - TPG (TPG.O) is stuck between the mortal world and the afterlife with its dalliance with Australia’s funeral-services company InvoCare (IVC.AX). But the roughly 20% stake it picked up around the same time locks the pair into an awkward dance. InvoCare was open to better terms, and offered the suitor access to limited, non-public financial information. Following the collapse of Silicon Valley Bank in the United States, rising global worries about financial stability will make it harder to do deals. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Beijing's retaliatory strategy against U.S. chip sanctions is a bigger worry. Taiwan Semiconductor Manufacturing has so far remained relatively unscathed since Washington stepped up sanctions to hobble China’s domestic semiconductor development. Second, even if Chinese companies account for just 11% of TSMC’s top line, its other customers are far more exposed to the People's Republic. How Beijing responds to American pressure will define the scope of TSMC’s recovery. In January, TSMC said its capital spending in 2023 would be between $32 billion and $36 billion, compared to $36.3 billion in 2022.

HONG KONG, April 17 (Reuters Breakingviews) - Hong Kong could use a shot of something. Yet compared to the $313 billion Shanghai-listed behemoth Kweichow Moutai (600519.SS), debutante ZJLD is a drop in the near-$100 billion baijiu industry: it logs less than 1% market share. At the top of the marketed price range, ZJLD could be worth $5.4 billion, or almost 24 times this year's forecast earnings, IFR reports. Revenue at the company, which will be the first baijiu distiller to list in Hong Kong, was up a healthy 15% last year, while its adjusted net profit margin topped 20%. For Hong Kong, consumer stocks will put the focus back onto classic risks.

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