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Took off from HK

June 24, 2011 – Comments (1)

Now stranded in Beijing.

I hate you Continental Airlines.



Thoughts from an anonymous banker on China

June 22, 2011 – Comments (11)

The most interesting things are always said off the record. While you won’t get attribution for these observations from a very opinionated investment banker, I thought they might all be worth talking about. (Note: I don’t agree with all or maybe even any of them)

On Goldman Sachs
They are so short-term now…and hedged long/short. If they are involved in something, it will eventually blow up.

On U.S. companies operating in China

Most are not complying with U.S. law. They are bribing officials and just not telling you. Ask them. Ask them point blank.

On Big 4 auditors
They are destroying Chinese companies by forcing them into non-Chinese financial frameworks. When Chinese companies go public, they are #1 or #2 in their industry. After the big 4 get to them, they are trash. Think about it: If you pay all of your taxes, then you have no money left to pay your bribes. They also have no ethics. Why don’t they ever find problems at big companies like PetroChina? PetroChina is doing many of the same things as the small companies, but it would be bad for business to criticize the Chinese government.

On the Chinese stock market

It is a joke, a game. No companies use it for corporate financing. And there is too much money and not enough stocks. Very overvalued. Why does Geely have a higher multiple than BMW? Geely is trash next to BMW -- worse company, worse brand, worse cars, etc. And BMW probably has more growth in China. As soon as the people buying Geely cars today have enough money, they will buy BMWs.

On the French
French companies do very well in China because they’ve learned all of the Chinese tricks and are happy to use them!

On Chinese A shares

Why has there been fraud in U.S.-listed Chinese stocks, but not in China-listed Chinese stocks. The answer is not that fraud does not exist in China listed stocks. These guys all learned the same things. Rather, the Chinese government is probably being very careful about fines and penalties to maintain stability.



Shanghai SuperBrand Mall Walk

June 18, 2011 – Comments (1) | RELATED TICKERS: YUM , NKE , CROX

Shanghai SuperBrand Mall (Pudong)

Just got done with one of the many mall walks I do while traveling (I hate the mall in the US, but generally enjoy the experience abroad). Spent about three hours in the SuperBrand mall, which is in Pudong near the Huangpu amid many luxury hotels and tier 1 office properties -- so this is high end consumer stuff. It's also Saturday and it's raining here, so as you might expect the mall was packed -- giving me a pretty good sample size for checking out the appeal of certain brands and stores to China's richest consumers. The mall is also massive -- 10 floors of shopping, restaurants, arcades, and an IMAX movie theater.

Who’s hot and who’s not? Read on to find out…

Fast Retailing
Happy to say that this current GG recommendation was hitting it out of the park. Uniqlo store on 3F was in a prime spot, packed with customers, and the line to buy was 10 deep the entire time we were in the store, but moving rapidly thanks to very efficient staff. Prices ranged from RMB59 ($10) for T-shirts to a few hundred RMB for dresses and nicer clothes. That said, lots of good deals -- and I even walked out of there with a linen shirt for RMB99 (can't beat that price!).Also happy to say that I dropped by H&M and Zara, which I consider relevant comps, and Uniqlo was blowing them out of the water in terms of traffic and commercial activity. Obviously, it's just one store, but I was a happy shareholder today seeing the success they were having. If this concept can grow rapidly in China, then the stock is a real bargain at present prices.

Toys R Us
Chinese consumers can be notoriously stingy about a lot of things (try to get them to pay for something on the Internet), but when it comes to their (one) child, they are spendthrifts. Toys R Us was packed with threesomes (mom+dad+child) buying everything from puzzles to games to dolls to robots -- robots were very popular. Interestingly did not see any video games, so the concept here is really catering to under-12s.

Din Tai Fung
Food is awesome (great soup dumplings). People were waiting out the door throughout both dinner last night and lunch today (yes, we’ve already eaten there twice). I don’t believe it’s possible to invest in Chinese operations, but Singapore-listed Breadtalk Group has some expansion rights to the concept outside of China. Unfortunately the Breadtalk Group Breadtalk location in the 1F food court was bereft of customers.

YUM! Brands
Both Pizza Hut and KFC, which here were relatively fancy sit-down places, were mobbed throughout lunch. Pizza Hut was pushing a RMB40 pizza deal.

I’ve looked at this Japanese lingerie company in the past for many of the same reasons I own Fast Retailing -- knowledge of Asian tastes gives it a leg up as it seeks to expand in China. I’ve avoided it thus far because closely-held Triumph is also doing well here, but the activity around the brand today may be reason to revisit it. Of course, the fact that they were hosting a fashion show probably helped in that regard (don’t miss the video).

Not sure why, but was wildly crowded with people buying the shoes.


Inditex and Hennese & Mauritz
Already mentioned it above, but their flagship stores were dead relative to Uniqlo.

Adidas and Nike
Very little interest around the sporting goods brands. Obviously we know the Adidas numbers are doing decently here, but unlike Uniqlo, the branded sportswear was extremely expensive. No price break from what you’re paying in the U.S., which is a stretch even for buyers in Pudong. Might be nice to see Adidas try to do a more local execution at some point with lower-priced goods (maybe they can use Reebok for that?).

Columbia Sportswear
These western concepts were also all very quiet on what was otherwise a very packed day at the motel.

You can find the video on our microsite:

And the photos on the microsite or flickr:

Tim  [more]



Inadvertent Insight Into China

June 17, 2011 – Comments (2)

This is the first trip to China for our Foolish colleague Scott Schedler. He's having a great time, but unfortunately due to smog in Beijing and now heavy rain Shanghai, he has to reason to believe that the sun ever shines here. Looking up at the sky yesterday as we were coming home from a meeting, he finally sighed and said that he was "giving up on visibility in China."

Of course, after several meetings in which companies were telling us just how hard it is to do business herre, Sean and I both thought he was talking about something other than the weather.

Thankfully, it's starting to look like the rain may actually clear up:

Rainy Shanghai 001  [more]



China Quote of the Day

June 17, 2011 – Comments (3)

This is one I heard today that should be stamped on your passport when you enter the country...

"China: Where nothing is allowed, but everything is possible."

So solid.

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