Meet the new generation of Chinese leaders. The Communist Party of China officially unveiled the seven new members of its Politburo Standing Committee, China’s top governing body. Xi Jinpingi was appointed the new General Secretary of the party, and will become China’s next president. Others include premier-to-be Li Keqiang and financial chief Wang Qishan, who will be in charge of fighting corruption.
Analysts caution not to expect sweeping changes to be implemented by the new leadership team, which is a mix of conservatives and reformists.
"The new leadership looks in all likelihood to be a carefully balanced coalition, and a carefully balanced coalition is not a structure that is conducive to very decisive policy making," said Chinese governance expert Minxin Pei of Claremont McKenna College in California, according to BBC News
Cheng Li of the Brookings Institution agreed, telling the Wall Street Journal
, “The new leaders might be competent economic managers, but they have a reputation as conservatives on political reform.”
Here is this week’s top business news:
(NASDAQ:AAPL): Will Apple finally be able to sign a deal for China Mobile
(NYSE:CHL), the world’s largest mobile operator by subscriber, to carry the iPhone? It’s very likely, if Morgan Stanley analyst Katy Huberty is to be believed. In a bullish note on Apple released on Thursday, Huberty, who met several times with those in the Apple supply chain, wrote:
“Distributors expect iPhone 5, with its new form factor, and iPad Mini, with a lower price, to sell well in China. The industry expects the Chinese government to issue LTE licenses in 2H13, which likely coincides with an iPhone distribution agreement with China Mobile.”
Huberty reiterated her Overweight rating on shares of Apple with a $714 price target, owing to the likelihood of a China Mobile deal, which would enable Apple to access a large number of potential customers, and lead to strength in iPad and iPhone demand in the months ahead. (“Key suppliers into iPhone and iPad noted above seasonal March quarter order trends, stronger than expected December quarter revenue, and the potential for further upside to expectations before year-end.”)
The analyst also added that component costs will drop, which will improve Apple’s gross margins.
“Expect continued component cost downs, though NAND prices could be more stable and decline less than the 40-50% through the iPhone 4S cycle. Other components like panels, PCBs maintain trend of mid single digit quarterly price declines to Apple which help drive gross margin improvement in C1H13,” she noted.
(NYSE:RENN): China’s Facebook
(NASDAQ:FB) is struggling due to the weakness of the Chinese online advertising market. For its third quarter, the company posted a $15.4 million loss, or $0.04 per American depositary share (ADS), compared with a year-ago loss of $1.2 million, or break-even on a per ADS basis. Revenue increased 47% to $50.4 million, but what worried analysts was the 14% decline in display advertising.
Renren forecasts current quarter revenue of $45 million to $47 million, when the consensus estimate was $51 million.
Pointing out that Renren’s third-quarter report was the latest sign that the monetization abilities of Chinese social networks is still lackluster, Pacific Crest Securities analyst Evan Wilson said in his research note, “We remain cool on Renren and the Chinese Internet space until we can see a turnaround in China’s macro conditions and its online ad market.”
(NASDAQ:SINA): China’s undisputed microblogging king Sina Weibo announced this week that it has passed the 400 million users milestone. Sina, however, acknowledged that rival Tencent’s
(HKG:0700) mobile messaging app, WeChat, is proving to be a strong competitor.
Sina chairman Charles Chao said in an earnings call that the total time spent by users on Weibo fell a bit in the third quarter from the second quarter, thanks to robust competition from WeChat. The latter, which was introduced in 2011, now has more than 200 million users.
“I think as everyone knows that Weixin and Weibo are probably the two most popular applications on the mobile terminal right now. Weibo is probably more like a public network, (with) people sharing information publicly, whatever they say or publish can be seen by everybody. But Weixin is more like private network, people sharing information content among friends, and people know each other,” said Chao, according to the Wall Street Journal
For the third quarter, Sina reported earnings per share of $0.17 on revenue of $147.70 million. Analysts had predicted per-share earnings of $0.06 and revenue of $146.03 million.
No positions in stocks mentioned.
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