China's New Bubble: From Fireworks to Internet Finance

Panda Fireworks (600599.SS) is getting into the Internet business now that fireworks sales are sliding.

First a description of Panda Fireworks:
PANDA FIREWORKS GROUP CO., LTD. is principally engaged in manufacture, distribution and display services of fireworks. The Company provides firecrackers, composite fireworks and toy fireworks, among others. The Company also provides firework display services for ceremonies, sports meetings, concerts, banquets, festival activities and religious rituals, among others. It distributes its products in domestic and overseas markets.
This is a billion-dollar company that lives and breathes fireworks. The latter is part of the problem.
Now fireworks maker joins China's tech gold rush
Panda Fireworks Group Co Ltd said on Friday it plans to diversify into investing in Internet and high-tech companies, as demand for fireworks has weakened after a government push to reduce noxious air pollution.

The announcement highlights the frenzy surrounding China's tech sector, where many firms boast eye-popping valuations and rapid growth. It is pulling in companies with little experience in the industry who want a piece of the wealth.

It comes after Premier Li Keqiang trumpeted this month policies to support innovation and drive entrepreneurialism in China.
The move into Internet finance follows a failed push into the film industry (see Sina news below).

The Global Times has further coverage of the rush in Companies jump on ‘Internet plus’ bandwagon
Against this backdrop, it seems justified that the capital markets have been taken with Internet-related companies recently. For instance, shares of the Shenzhen-listed online education platform operator Guangdong Qtone Education Ltd surged above 300 yuan ($48.29) Tuesday, making it the most expensive stock on the A-share market in terms of share price. On the same day, ChiNext, China's NASDAQ-style board for high-tech and emerging start-ups, hit an all-time high of 2,363.05 points. The board is up nearly 60 percent this year.

Encouraged by such an active market response, many traditional companies have been rushing into similar deals. On March 12, Shanghai-listed auto maker SAIC Motor Corp announced that it would cooperate with e-commerce giant Alibaba Group Holding to invest 1 billion yuan in developing smart cars, with the first series to be launched in 2016. Meanwhile, Baosteel is reportedly planning to enter the e-commerce business to better facilitate steel transactions. And on Sunday, Fu Chengyu, chairman of China Petrochemical Corp (Sinopec), said six new innovative businesses including car networking and Internet financing would become the main focus of its non-oil business this year. In addition, China's sole listed fireworks maker Panda Fireworks Group Co recently announced it would open a new frontier in Internet finance as a key development aspect. And Shanghai DZH Ltd has jointed forces with Xiangcai Securities to form the first Internet brokerage.

While all the abovementioned companies have been serious about how to stay afloat in the Internet era, the securities market has never been short of speculators who are trying to catch up with the "Internet Plus" trend to jack up their share prices. Investors need to watch out for risks and bubbles when it comes to investment in the Internet-related sector.
Some of the deals make sense, such as the Internet brokerage, but Sinopec is straying far from its core competencies. Capital destruction will be the likely end result of these investments, and it comes on the heels of poor results from the foray into real estate.

Qtone (300359) traded at 100 yuan per share at the end of January and topped out at 320 yuan on March 24. Since then it has fallen to about 256 yuan per share. At the bottom of the chart you can see the Shenzhen index return this year: 11.44% versus the 190.37% gain in Qtone. The P/E on Qtone is only 533 and the P/S is 154.

Sina: 熊猫烟花拟剥离主业转型互联网金融
In addition, the company will invest 50 million yuan to set up Panda Technology Investment Co., will be mainly engaged in high-tech industries equity investment business, agency other venture capital companies and other institutions or individuals venture capital business, venture capital consulting business, providing venture capital for the venture capital business management services business.

Fireworks because the main industry of appetite, Panda Fireworks have been seeking the company's transformation. Earlier plans to enter the film industry after setback, the company launched in July last year net loan platform P2P network Silver Lake, October will be completed ahead of turnover breakthrough performance targets previously established $ 200 million. Late last year the platform registered capital increased to 200 million yuan,

After initial success, Panda Fireworks more thorough transformation of the Internet banking. Panda Fireworks Monday night's announcement that the company intends to change the name and business scope, proposed to the securities referred to by "Panda Fireworks" is changed to "Panda Holdings." In addition, the company intends by subsidiaries Panda Capital Management Co., Ltd. invested 100 million yuan to set up financial information panda, panda invested 100 million yuan to set up all the chips, invest 200 million yuan to set up a small panda loan.

The company said the fireworks business for the company's main business, but taking into account the fireworks industry status and internet financial good industry prospects, the company decided to upgrade to the Internet in the financial sector as the focus of future development direction of the company, in order to further diversify business risk, improve company performance .

It doesn't end here though. Air conditioner maker Gree is getting into smartphones.

Breezing into the smartphone market: Gree, China’s top air-conditioner, announces new device
Air-conditioning powerhouse Gree Electric, one of the most popular air-conditioner brands in China, will release its first smartphones within six months, taking on a tough market filled with big rivals including Xiaomi.

Gree will release a high-end smartphone model as well as a version aimed at bargain-lovers, according to Dong Mingzhu, chairman and president of the Zhuhai-based company, in an interview with news portal QQ Tech.

It was the first time she acknowledged that the company would be releasing smartphones in the market. Speculation about the release had been rife after she briefly flaunted a smartphone with a Gree logo on its back during a university lecture in Guangzhou on March 18.

Gree, the world’s largest specialised air conditioner manufacturer by sales, began to consider making its own smartphones two years ago, Dong said, adding that the firm's management had been using a prototype for two months.

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