China ETFs, Tech Stocks Looking Plungy

The bottom chart is the 3X Daily Inverse China fund, YANG.

Here are some tech-related China stocks listed in the U.S. Alibaba (BABA), CTrip (CTRP), Fang Holdings (SFUN), Weibo (WB) all display topping patterns, Jingdong (JD) and Netease (NTES) already breaking down.

SouFun Gets Dumped Again

SouFun stock has been taking a beating. It sank again as cooperation with Century 21 China was terminated.

SouFun Announces Termination of The Strategic Cooperation Agreements with Century 21 China

Back in September, Century 21 started selling houses on Taobao after a dispute with Soufun.

Prior coverage: So Long, SouFun

More here: SFUN

Here's the Chinese coverage, questioning the sustainability of the O2O business model: 搜房网再遭中介抛弃 房产电商主导O2O模式恐搁浅

O2O stands for "Online to Offline," a confusing acronym for online businesses that intermediate between an offline business and a consumer. Group buying movie tickets, for example, is O2O.

The main issue with SouFun, as I see it, is cost and a contracting real estate industry. There's less money to go around and cuts have to made somewhere.

If you bought puts, congratulations.

China Real Estate of Affiars

Recent stories from Mingtiandi.

SOCAM SLASHES CHENGDU PRICES BY 30% IN SCRAMBLE FOR CASH

Socam Development, an affiliate of Shui On Land cut prices by 30 percent at a housing project in central Chengdu last week as the troubled real estate company struggles against slumping sales and falling prices.

YUEXIU PROPERTY PLANS $495M RIGHTS ISSUE IN CHINA CASH CRUNCH

Yuexiu Property announced last week that it plans a HK$3.84 billion ($495 million) rights issue, becoming the second major Chinese real estate developer in a week to turn to the equity markets as slowing home sales continue to squeeze the country’s property companies.

CENTURY 21 REAL ESTATE NOW SELLING HOUSES ON ALIBABA’S TAOBAO

Century 21 China, which is a franchise of the well-known US chain, last month joined a number of other large real estate agencies in pulling their listings from China’s biggest real estate website, Soufun.com. The boycott of the giant real estate site was sparked by disputes over what the agencies termed unfair pricing by Soufun.

In the announcement of its new tie-up with Taobao, however, Century 21 only wanted to talk about the future.

So Long SouFun

Last week I wrote:

For myself, I'm looking at puts on SFUN.

The trade is getting crowded.

SouFun Holdings Target of Unusually High Options Trading

SouFun Holdings (NASDAQ:SFUN) was the target of unusually large options trading on Wednesday. Investors acquired 8,543 put options on the stock, American Banking News.com reports. This is an increase of 156% compared to the typical volume of 3,343 put options.

SFUN has a bearish price pattern on its chart, so it may be shorts. Or maybe it is news driven?

SouFun No Fun? Chinese Property Agencies Boycott Online Apartment Listings

At a Tuesday press conference in Shanghai, representatives from 13 local property agencies outlined their grievances against SouFun while sitting in a row below a red banner that read: “Calling for honesty, Resist SouFun” in yellow characters.

The 13 agencies said in a press statement that SouFun is unfairly using its market power to raise prices. The property portal, which is listed on the New York Stock Exchange and has listings covering more than 330 Chinese cities, has fostered an atmosphere of “unhealthy competition” among brokerages that disrupts the market, they said.

......In Shanghai, the impact on SouFun’s listings has been significant, with the combined listings of the 13 brokerages boycotting the site comprising around 30-40% of the portal’s local listings, the SouFun spokeswoman said.

This is a new development in the fight between property agents and SouFun. I covered it previously in: Why Shares of SouFun Are Sinking and SouFun Update.

Relevant parts from each:

On May 28, nine real estate agencies in Hangzhou pulled all their listings from SouFun's website, and this quickly spread to other cities including Beijing. A person from an agency in Beijing said firms have been in discussion with SouFun about cutting prices since the end of the year; the Hangzhou news was these negotiations breaking out into the open.

我爱我家 said it is built its own website to get around costs of ￥500-600 per user, which came to more than ￥100 million per year for the firm.

And later:

Soufun announced today it will offer 40% discount on subscription fees nationwide from June to its secondary listing customers (~25% of revs), which we believe is a major downside surprise for the market apart from e-commerce competition.

This is all housing slowdown related. Property agencies are looking to cut costs. This article reports SouFun's listings fell 30% on Tuesday as a result of the boycott: 端口费之争不妥协 搜房网房源数锐减超三成

End of Buying Restrictions Shows Spec Demand is Gone

Here is what I've said many times about buying restrictions:

...easing buying restrictions is a bad policy because it won't work. It allows speculators and investors to buy up homes, but the trend now is for investors and speculators to sell homes. It may help the big investors who need to offload 100 homes to another big investor, but speculation has died down considerably. In cities that have eased policy, they have made it easier for home buyers to obtain residency. Those cities have made home buying more attractive.

I'm not ready to declare total victory yet because September and October are the big sales periods, but.....报告称内地多城楼市取消限购后成交量仍下跌 (After Many Cities Cancel Buying Restrictions, Sales Still Fall)

The article says that Hangzhou, Jinan and Nanning have seen some quick results following the cancellation of buying restrictions, but most cities have seen no impact. Jinan has seen area sold triple two weeks after easing restrictions, while Nanning average weekly sales are up 27% since it unofficially eased 11 weeks ago. However, sales are down from the 170,000 sqm sales peak in the first week to about 100,000 sqm per week. Hangzhou and Wenzhou saw huge weekly sales spikes recently (see here and here), but that growth also may fade quickly.

Regarding Nanning, it is one of the cities that eased restrictions: Nanning Fires First Rescue Shot

Back to the latest article, Changchun and Wuhuan have seen small sales bumps of 5% following the easing of buying restrictions. Tianjin and Xiamen have seen no increase in sales. Nanchang and Wuxi have seen sales continue to fall. Source: .报告称内地多城楼市取消限购后成交量仍下跌

Elsewhere: Qingdao has eased restrictions on homes 144 sqm and larger. (青岛明日起有条件放松限购 市区144平米以上将不限购)

Chinese buyers now have a "wait-and-see" attitude. Even if the cancellation of buying restrictions could have an impact, the big sales period is September and October. Buyers may wait until then, when price discounts are expected to be bountiful and many new developments will enter the market. Discounts will be guaranteed if sales don't pick up in August as well because it will be developers last shot at big sales in 2014.

For myself, I'm looking at puts on SFUN.

SouFun Update

On June 6, SFUN was trading at $11.03. I posted: Why Shares of SouFun Are Sinking

The main part:

On May 28, nine real estate agencies in Hangzhou pulled all their listings from SouFun's website, and this quickly spread to other cities including Beijing. A person from an agency in Beijing said firms have been in discussion with SouFun about cutting prices since the end of the year; the Hangzhou news was these negotiations breaking out into the open.

SFUN finally gave in this week: Can SouFun Cope With China’s Property Market Slowdown?

Deutsche Bank believes not, saying that Soufun will have to make price concessions to property developers “across the board” until China’s property market firms up again. As such, analysts Vivian Hao and Alan Hellawell III lowered their price target by 31% to $11 and downgraded this stock to Hold. Here are the analysts:

Soufun announced today it will offer 40% discount on subscription fees nationwide from June to its secondary listing customers (~25% of revs), which we believe is a major downside surprise for the market apart from e-commerce competition.

We expect the recent disputes between SouFun and major regional property agencies (e.g. Hangzhou) to be settled via a major pricing concession by SouFun. It has said it will offer: 1) a 40% discount on listing fees (est. ~$80m giveaway in value), 2) free mobile inventory, and 3) financing support starting June. We expect this to be implemented across the board to avoid a massive inventory pullout and agency customer attrition until transaction volume recovers.

Shares are oversold and may close the recent gap, but they are also still in the same downtrend that began in March. This latest bad news didn't shake SFUN out of the downtrend, it sent shares down to the lower trendline.

Why Shares of SouFun Are Sinking

Shares of SouFun (SFUN) have been under pressure this year due to the weak real estate market. Unlike copper and real estate developer shares, SFUN hasn't bounced much and what bounce did occur was aborted in late May. Shares fell particularly hard on May 29 and May 30 and have lost more than 15% in the past week.

This latest drop may be due to investors pricing in this news: 北京杭州等中介封杀搜房网 因每年需付上亿端口费 (Beijing, Hangzhou, etc. Real Estate Agencies Shut Out SouFun Because of High Fees)

On May 28, nine real estate agencies in Hangzhou pulled all their listings from SouFun's website, and this quickly spread to other cities including Beijing. A person from an agency in Beijing said firms have been in discussion with SouFun about cutting prices since the end of the year; the Hangzhou news was these negotiations breaking out into the open.

我爱我家 said it is built its own website to get around costs of ￥500-600 per user, which came to more than ￥100 million per year for the firm.

This portion is key. In the simplest terms, SouFun's business model worked when home sales are steady because new ads quickly replace old ads. With home buyers now limited, agencies are paying over and over again to keep their listings on top and its resulting in a lot of duplicate ads cluttering the site. it's costing agencies money and the return on their ad spending is plummeting.

The so-called search room upgrades, the core is to increase the number of indicators and port package sorting privileges. Every "update packages" on sorting and function will take significant advantage, and the effect of the original low-port package dropped. In this context, the agency in order to maintain the effect does not drop, had to choose a higher priced product packages.

It seems that some intermediaries, because rules of the game by the Soufangwang grasp, as a user enterprises can only follow. This is a single large network platform kidnapped all intermediaries, almost no room for negotiation, regardless of their packaging, in fact a disguised price hikes.

On the other hand, the package upgrade several times more than the number of listings, resulting in a large number of duplicate listings, buyers how much traffic there is no corresponding increase. This false prosperity, making homebuyers face of dazzling information helpless, unable to find suitable housing information, resulting in a buyers find room selection process more difficult and inefficient.

Vice President of 我爱我家 Hu Jinghui said due to the limited number of actual buyers, Soufangwang PC and wireless port package is actually recurring charges. Brokerage network marketing costs increased, but no significant effect on enhancing volume.

I'm unfamiliar with SouFun, but this does not sound like a small problem. The drop in the share price indicates those who knew of this on May 29 considered it a reason to heavily sell. Whether the impact of the news is reflected in the price remains to be seen.

北京杭州等中介封杀搜房网 因每年需付上亿端口费

Recently, Hangzhou 9 intermediary Soufangwang all the listings in the shelf, the contradiction between the agency and the electricity supplier in the open. The number of agency headquarters in Beijing, there is a see-saw in the commercial war. Beijing to set up a chain of family, I love my family, agency Centaline Union, wheat fields of real estate, Century 21 Real Estate agency composed of five negotiating with SouFun. According to the Beijing Union intermediaries an intermediary company said on Friday Soufangwang will develop a variety of demands put forward by an intermediary Alliance program and invited intermediary Union negotiations. "Now the situation was worse than a stalemate, we are always ready for the next frame", a Beijing-based agency official said.

Intermediary shelf imminent

Since May 28, the agency in Hangzhou nine coalition Soufangwang all the listings in the next frame after this incident quickly in other cities fermentation. According to an intermediary in charge of the headquarters in Beijing's introduction, "We demand the search room price, from the end of last year began, and Hangzhou event will open conflict .. We also put some demands, such as we found room to plan."

According to reports, after the Hangzhou event, large intermediary companies have protested to SouFun, which requires package price, daily or monthly payment methods is an important part of the negotiations.

According to informed sources, Soufangwang president Vincent Mo wrote a long letter written安抚伟industry I love my family, Vice President Hu Jinghui , the "core meaning Soufangwang be great customer service is good, but found room high-level and general manager of the entire country Dragon Boat Festival are meeting to discuss the program. " The Soufangwang will develop a plan as soon as possible to negotiate alliances with intermediaries, this event may be the ultimate solution to about 20 this month.

Disputes also make capital markets react quickly. U.S. stocks opened from the U.S. Eastern time at 9:30 on May 29, when on June 5 deadline, the NYSE-listed mainland stocks found room (NYSE: SFUN) shares fell to $ 11.26 from $ 13.37, down over 15.78%. Market capitalization of about 5.3 billion yuan quietly evaporated.

"Every year million port costs"

Real estate agency with long conflict between the electricity supplier, in March of this year, Beijing and Shanghai nine major league intermediary agency composed resist live off of price behavior, and the shelf nine intermediaries Beijing and all the listings in Shanghai. The agency is also aware can not be too dependent on the external network, the official website began to grow as an intermediary, the intermediary also return each Ben, reduce expenses.

"Every year we paid Soufangwang port fees billion, an average of $ 500-600 per port and now we also build their own official website, so we have emboldened the shelf," I love my family said.

Industry insiders said the electricity supplier port is a channel to attract tourists, to form a transaction, or the need to visit the store, so the electricity supplier is not the monopoly of the only channel listings, but for electricity providers, it is more reliance on port charges The.

Industry downturn exacerbated contradictions

In fact, the root causes of conflict, nothing more than this year's Beijing second-hand housing market downturn, contradiction and SouFun package cost between rising again.

Statistics show that this year, second-hand housing market as a whole at low levels. May, 6929 in Beijing second-hand housing units were traded, turnover fell by 9% last month, compared with the same period last year fell 5.5 percent, below the volume continuous February 8000 sets. This is Beijing second-hand housing intermediary results of operations is undoubtedly a heavy blow.

According to insiders, Beijing second-hand housing turnover 9000 is the industry's breakeven point sets. And this year, the Beijing second-hand housing market has been unable to break through 9000 sets, the whole industry is currently in a loss.

The electricity supplier industry revenue has been steadily rising. SouFun results, 2010 found room to help (SouFun hand housing product) distribution system is only $ 40.4 million revenue, Soufangwang housing rental information dissemination revenues has reached $ 161.5 million during 2013. This development in 2008 after forming a network broker products achieved in the fourth year of explosive growth. One quarter of this year, found room to help the listings posted revenue of $ 42.1 million, and $ 26.8 million for the same period last year an increase of 57.1%.

Business electricity suppliers rely on second-hand housing agency, but in second-hand housing industry and the electricity supplier industry performance contrasts huge case, the electricity supplier price rise, not fall, this approach allows the agency to accept, finally come out against the collective.

Controversy

Frequent price hikes push new disguise?

It is understood that second-hand housing Web search platform, most of the packages using the port to charge the agency model, you need to brokers in the background through the issuance of rules found room and other network platform developed in the foreground show it to buyers. In order to occupy a "favorable terrain", the broker had to refresh methods such as high-frequency updates.

The so-called search room upgrades, the core is to increase the number of indicators and port package sorting privileges. Every "update packages" on sorting and function will take significant advantage, and the effect of the original low-port package dropped. In this context, the agency in order to maintain the effect does not drop, had to choose a higher priced product packages.

It seems that some intermediaries, because rules of the game by the Soufangwang grasp, as a user enterprises can only follow. This is a single large network platform kidnapped all intermediaries, almost no room for negotiation, regardless of their packaging, in fact a disguised price hikes.

On the other hand, the package upgrade several times more than the number of listings, resulting in a large number of duplicate listings, buyers how much traffic there is no corresponding increase. This false prosperity, making homebuyers face of dazzling information helpless, unable to find suitable housing information, resulting in a buyers find room selection process more difficult and inefficient.

Vice President Albert I love my family, said Hu Jinghui, due to the limited number of actual buyers, Soufangwang PC and wireless port package is actually recurring charges. Brokerage network marketing costs increased, but no significant effect on enhancing volume.

As for how to deal with this incident, Soufangwang public relations department did not respond.

Currently Beijing, the Albert I love my family, chain of family property, real estate and other wheat fields and several companies are SouFun negotiation. Prior to June 20, if the above Soufangwang no real action to address these issues, cause I love my home in Beijing to promote a second-hand housing will stop cooperation with SouFun.

- Albert I love my family Hu Jinghui, vice president

SouFun brokerage firms and conflict, it is normal market behavior. As a brokerage firm, when the market situation is not good naturally want to get some profit sharing, but it takes time to realize the wishes of both parties agreed. As regard Association, hopes the two sides can successfully negotiated settlement.