Come late to the party and there won’t be much cake left. French auto maker Renault (RNO.EPA) has taken a big risk in not setting up production facilities in China. It is finally doing so in a US$1.27 billion partnership with Dongfeng Motor Group (HKG.0489) that has just been approved by regulators. Renault desperately needs to boost its paltry 3.1% share of the Chinese passenger car market as sales growth in Europe and other developed markets continues to slow. The joint venture aims to have locally manufactured cars on the road by the first half of 2016. Rivals have been building in China for years, leaving the French firm with much ground to catch up on, but Europe-based analysts told China Economic Review they are upbeat on its prospects. Key to this is its partnership with Japanese auto firm Nissan (7201.TYO), which has had facilities in China for more than a decade. “We are in a second stage in the alliance between Nissan and Renault where synergies increase meaningfully as both companies are increasingly linked. China should be for them one of the regions with the highest potential for additional synergies,” Thomas Besson, a Paris-based analyst at KeplerCheuvreux, said in an email. “Both companies will use similar platform, components and suppliers. Clearly Renault is late, but Nissan’s presence and expertise gives them a strong hedge.” Besson has a “buy” rating on the stock.
Getting faster at shopping and searching
China Economic Review doesn’t like to repeat stock themes too often but when market enthusiasm snowballs and analysts get so excited it doesn’t hurt to have a second look. Just over two weeks ago, regulators finally issued licenses for 4G networks (albeit on a single standard for now) that will enable China’s fast-growing army of smartphone users to do even more on their devices. As previously noted, China Mobile (CHL.NYSE, 0941.HKG) has the lead on the first standard and is strongly positioned to jump ahead of rivals in this field. Francis Cheung, head of China and Hong Kong strategy for CLSA Asia-Pacific Markets, on Wednesday enthused to reporters in a presentation about the stocks that shine in 4G’s light. VIPShop Holdings (VIPS.NYSE), China’s largest website for “flash sales” where users have a limited amount of time to buy specially reduced items, should see more users from faster net speeds; its stock price has quadrupled in 2013 to date. Cheung, who expressed his surprise at how cheap smartphones have become, has included Lenovo (0992.HKG) in his top 10 stock picks on “improving profitability in China smartphones.” Internet giant Baidu (BIDU.NYSE) is also a top pick as “mobile monetisation has been boosted by the new integrated mobile and PC ad platform.” Once other standards have been approved expect this space to get more attention.
