After All That We've Been Through, It All Comes Down

Well, here we are again
I guess it must be fate
We've tried it on our own
But deep inside we've known
We'd be back to set things straight

Hong Konked

August tends to be negative for emerging markets. Stocks such as HSBC are right at major support. Some such at LFC have similarly large topping patterns. CHL looks primed for a breakdown with support maybe around $25. I don't think the March 19 low at $29 and change will hold if tested.

Time to Go Mobile

No position, but could be a great bearish setup here. Same logic as buying March 2020 PetroChina puts in July 2019. Only downside is puts are more expensive now, but still cheap if there's a major yuan deval or economic crisis on the way.

Messaging Battle Royale: Sina vs Tencent vs China Unicom vs China Mobile

Sina's Weibo service and Alibaba have linked up. Now China Unicom has linked up with Tencent's WeChat software.
Wechat, Weibo vs. SMS

"The telecommunications companies may try to invent a competitive instant messaging service of their own. The other way is to cooperate with OTT service providers. But the disadvantage in the first solution lies in the fact that the telecom companies are unfamiliar with making Internet-related products; so their products might not give the users the same comfortable experiences when it's put to use. China Unicom has opted for the second solution by seeking cooperation with WeChat."

In fact, the popular messaging App -- WeChat is not just conquering user but turning rivals into partners. China Unicom in Guangdong province and WeChat's owner Tencent are introducing the first joint SIM card. Users can enjoy both WeChat's new services and discounts from China Unicom.

From August 8: China Unicom’s WeChat Subscription Plan Hits China Today

Today marks the first step in the tentative and possibly-doomed alliance between Chinese telecoms and WeChat, the OTT chat app that’s destroying their text messaging revenues. As of right now — the minute this post is published — China Unicom users nationwide* can purchase a special WeChat SIM card and access the app even if they don’t have a regular 3G subscription through the telco.

The card doesn’t just allow use of the wireless web for chatting, though, it also will allow users to use other data-heavy aspects of the app, including playing games, sending stickers, and making payments online. Users who purchase it can choose from a variety of plans, which run between 30 and 60 RMB ($5-$10) per month although other fees apply, including and up-front price for the card itself.

WeChat is Tencent's strong play. Weibo is Sina's. Weibo has added chat service and WeChat integrates with Tencent's other programs such as QQ and Tencent Weibo. But for now, both programs have a dominant niche. The main outlier so far is China Mobile.

Chinese Stocks: The American Option

If you want to invest directly in China without purchasing shares in Mainland companies, there are many stocks available on the American exchanges. These companies must comply with American listing standards, although as Jonathan Weil points out, that isn't necessarily saying much.

The are several major differences between the available stocks. First, some are ADRs of Chinese state-owned companies. China Mobile (CHL) falls in this category. Some of these companies have very odd share structures, such as China Yuchai (CYD). Shareholder Peter Delgado, II, is an activist shareholder in CYD, and he's written several articles on the company. Anyone who's serious about investing in state-owned companies should read his articles, which can be found on Seeking Alpha.

Next are Chinese companies that have listed directly on a U.S. exchange. Since it is difficult to list on the mainland exchanges, many companies chose to list overseas—especially Chinese internet companies. Here's a small part of Shanda's investor relations FAQ:

20. Where and when was Shanda incorporated?
Shanda was incorporated in the Cayman Islands in November 2003, however, our business was founded in December 1999 under the Shanghai Shanda Networking Co., Ltd.

21. Where is Shanda's stock listed?
Shanda's stock is listed on the NASDAQ National Market under the ticker symbol SNDA.

22. When did Shanda go public, and at what price?
Shanda issued 13,854,487 ADSs (American Depository Shares) on May 13, 2004 at U.S. $11 per ADS in its initial public offering (IPO). On June 2, 2004, Shanda held the closing for the over-allotment option in connection with its IPO. At this closing an additional 1,505,634 ADSs were purchased from Shanda and the selling shareholders, which increased the total outstanding Shanda ADSs to 15,360,121 and the total outstanding Shanda ordinary shares to 141,818,280.

Finally, there are American companies who do the vast majority of their business in China. A good example of this is Chindex (CHDX).

You can find American listed Chinese companies with market caps over $50 million at the website for the Halter USX China Index.