2023-07-10 06:52:42 ET
Summary
- Shares of Alibaba and Tencent rose amid optimism that China's tech crackdown is nearing its end; Alibaba's shares rose 3.2% in Hong Kong, while Tencent's rose 0.7%.
- New US guidelines for reviewing mergers and acquisitions could add months to the review process and significantly increase costs for companies and private equity firms.
- China's consumer prices were unexpectedly flat in June year-on-year, the lowest level since February 2021, while producer prices fell 5.4% year-on-year, the fastest rate of decline since December 2015.
Listen below or on the go on Apple Podcasts and Spotify Alibaba (BABA), Tencent (TCEHY) in focus as China unwinds tech crackdown (00:28). New M&A rules likely to delay deals by months, add significant costs (01:46). China's consumer inflation unexpectedly flat in June, producer prices fall further (03:19).
This is an abridged transcript of the podcast.
The Hong Kong-listed shares of Alibaba and Tencent rose on Monday, amid optimism that China's crackdown on the technology sector is nearing the end after the central bank imposed fines on Ant Group and Tencent ( OTCPK:TCEHY ) last week.
Shares of Alibaba ended 3.2% higher in Hong Kong, while Tencent closed up 0.7%. U.S.-listed shares of Alibaba (NYSE: BABA ) dipped 1% premarket on Monday after ending 8% higher on Friday.
The People's Bank of China slapped a $985M fine on Ant Group, in which Alibaba ( BABA ) owns a 33% stake. The fine means that Ant Group can explore an IPO again, close to three years after its plans were blocked for not meeting listing requirements.
After the penalty was revealed, Ant Group announced a surprise stock buyback that values the fintech giant at RMB 567.1B (~$78.38B), well below the $315B valuation sought in 2020 for what would've been the world's largest IPO. Alibaba ( BABA ) is considering participating in the buyback.
PBOC also fined Tencent ( OTCPK:TCEHY ) and its payment unit Tenpay ~$410M, which the company said will not have any material impact on its operations.
New U.S. guidelines proposed for regulators to review mergers and acquisitions have the potential to add months to a deal review, and companies and private equity firms may incur significant new costs.
Last month, the Federal Trade Commission and the Department of Justice released a proposed revision to the HSR filing process.
The revision would require companies and investment firms to submit additional information that the agencies had not previously requested.
This would mark the first change to the process since it started 45 years ago.
According to Kara Kuritz, who is an antitrust attorney with Vinson & Elkins and previously served as the HSR Act specialist at the DOJ's antitrust division, it generally takes about one to two weeks to prepare an HSR filing, However, the new proposed rules could add a few months to the process, and the filing party may not have access to all the information being requested.
Kuritz expects “most of the additional time will be on the front end, before the filing ever can be submitted to the agencies."
The agencies will ask for details about the transaction rationale and details surrounding investment vehicles or corporate relationships. The antitrust regulators will also ask for information related to products or services, both horizontal products and services, and non-horizontal business relationships such as supply agreements.
Kuritz expects that the new rules may add significant additional legal fees for companies and investment firms.
China's consumer prices unexpectedly were flat in June year-on-year, the lowest level since February 2021, compared with market expectations and May's 0.2% rise.
Meanwhile, producer prices fell 5.4% year-on-year, the fastest rate of decline since December 2015. That compared with a 4.6% drop the previous month, and a forecast for a 5.0% fall.
Core consumer prices, excluding the volatile prices of food and energy, went up 0.4% year-on-year, the least since March 2021, after a 0.6% gain in May.
On a monthly basis, consumer prices unexpectedly dropped by 0.2%, the fifth straight month of decline, and compared with consensus of a flat print.
The U.S. CPI report will be released Wednesday.
Other headlines to look out for on Seeking Alpha:
Record-breaking U.S. oil production helps thwart Saudi efforts to drive up prices
Goldman Sachs sees rays of hope in underperforming health sector
GridBeyond buys Veritone's energy business
Acumen, BridgeBio, Arcus among BTIG's top healthcare picks for 2H 2023
On our catalyst watch for the day, Sell-side analysts can begin to post ratings on CAVA Group ( CAVA ) following the expiration of the quiet period on the stock.
U.S. stocks on Friday stumbled through an uncertain trading session to end lower, as investors digested the latest nonfarm payrolls report following hotter than expected private hiring data the previous day.
The Nasdaq ( COMP.IND ) fell 0.13% while the S&P 500 ( SP500 ) slipped 0.29%. The Dow ( DJI ) ended 0.55% lower.
On a weekly basis, the Nasdaq was down 0.92%, the S&P was down 1.15% and the Dow was down 1.96%.
Of the 11 S&P sectors, five ended trading in the green, led by a more than 2% rise in Energy. Consumer Staples and Health Care topped the losers.
Yields were mixed on Friday. The 10-year yield ( US10Y ) was up 2 basis points to 4.06% while the 2-year yield ( US2Y ) was down 7 basis points to 4.94%.
Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are pointing lower. The Dow is down 0.1%, the S&P 500 is down 0.2% and the Nasdaq is down 0.3%. Crude oil is down 0.8% at more than $73 a barrel. Bitcoin is down 0.4%.
In the world markets, the FTSE 100 is up 0.1% and the DAX is up 0.2%.
On today’s economic calendar, at 10am Federal Reserve Vice Chair for Supervision Michael Barr will speak on bank supervision and capital rule.
For further details see:
Wall Street Breakfast Podcast: Alibaba, Tencent In Focus, Ant Group Fined