Credit Suisse fallout and Alibaba’s busy week

Hello, this is Kenji from Hong Kong, where we are in the midst of the busiest week of the annual corporate earnings season.

Arguably the most-watched sector is banking, and most mainland Chinese lenders listed in the city are set to disclose their results on Thursday and Friday. They are under an especially bright spotlight this year largely due to the global financial turmoil ignited by the bankruptcy of Silicon Valley Bank in the US.

This part of the world seems to have been less impacted so far, apart from share prices being hit for certain Japanese and Hong Kong lenders and holders of AT1 bonds issued by Credit Suisse being hit with an unpleasant surprise. But our correspondent in Vietnam has found an interesting connection between one of the country’s high-profile tech companies and the troubled Swiss bank.

Another notable aspect of the Hong Kong earnings season this year is the revival of face-to-face press conferences, the first since the Covid-19 pandemic. The chairmen of China’s three state-owned telecom operators took the opportunity to express their confidence and urge investors to change how they evaluate telecom shares.

Wang Chuanfu, the founder and chair of electric vehicle maker BYD, appeared in Hong Kong on Wednesday to reveal his goal of surpassing Volkswagen as the top-selling auto brand in China this year.

Whether their statements bear fruit is an open question, but at least there is now an opportunity for face time with these normally aloof mainland executives.

Ripple effects

Asia has in many ways seemed detached from the turmoil roiling the global financial sector lately, but Nikkei Asia’s Lien Hoang in Ho Chi Minh City reports that there could be an impact on Vingroup’s planned listing of its electric vehicle arm in the US.

EV maker VinFast is aiming to become the only Vietnamese company listed in the US, and it has been advised on the move by Credit Suisse among others. The question now is whether another bank will take up some of those functions after the Swiss lender’s surprise takeover by UBS.

VinFast’s planned listing and its business development in the US have been closely watched as a potential landmark for Vietnamese business in the country. While the IPO filing was made last year, its first 45 SUVs only landed in the US in March after a few months of delay. Its initial plan to kick off production in North Carolina has been pushed back a year to 2025.

A Vingroup spokesperson told Nikkei Asia that the buyout by UBS “will not have a negative impact on us,” but the country’s largest conglomerate by market capitalisation is “taking all the needful steps internally while waiting for an official feedback from UBS-CS after their structuring”.

Freeing up resources

China has freed a top chip investor to work on bolstering its semiconductor industry as it battles US tech export controls, writes the Financial Times’ Qianer Liu and Ryan McMorrow.

Chen Datong, head of Yuanhe Puhua (Suzhou) Investment, known as Hua Capital, was released following an eight-month detention, said two people with direct knowledge of the matter.

Hua Capital is an Rmb10bn ($1.5bn) investment firm that seeded more than 150 Chinese semiconductor companies. It has been at the forefront of Beijing’s efforts to jump-start its domestic chip production.

Chen was detained last August amid a storm of investigations into China’s chip industry, with officials upset that the sector has failed to nurture cutting-edge technologies after receiving tens of billions of dollars.

China’s top anti-corruption agency launched multiple probes last year into the $47bn National Integrated Circuit Industry Investment Fund, China’s premier semiconductor investment vehicle known as the “Big Fund”, detaining more than a dozen top chip executives and officials. Hua Capital was one of those that received funding from the Big Fund, and Chen was an independent member of its investment committee.

Tightening US controls on access to advanced technology in recent months has forced Beijing to rethink its approach to supporting the critical sector. That consideration led to Chen’s release.

Ringing the changes

Line chart of Stock and index performance (Sep 30, 2022=100) showing China state-owned telco shares have surged since last fall

Chinese president Xi Jinping’s abrupt lifting of the country’s stringent zero-Covid policy has helped fuel a sharp turnround in Chinese equities since last fall. But the three state telecom carriers — China Mobile, China Telecom and China Unicom — are leading the pack, helped also by Xi’s push to quicken the country’s shift to a digital economy, writes Nikkei Asia’s Kenji Kawase.

Speaking at in-person earnings calls for the first time in three years, the heads of these three companies struck a confident note, emboldened by their recent share price rallies.

Liu Liehong, chair and CEO of China Unicom, was the most straightforward about the change in the landscape. “Do not use an old pair of eyes to view today’s China Unicom and today’s telecommunication industry,” he urged investors.

However, all three are still far from their 2007 peak share prices, when the market treated them as leading growth tech shares.

Alibaba’s wild week

It has been a roller-coaster ride for Alibaba Group Holding this week, events closely followed by Nikkei Asia’s Cissy Zhou.

It started out with news on Monday that founder Jack Ma had returned to mainland China after nearly a year of travelling abroad. The entrepreneur and his corporate empire came under intense pressure from Chinese authorities following his speech in October 2020 openly criticising the country’s financial regulator.

Ma’s return was followed the next day by China’s cyber space watchdog announcing it will kick off an official campaign against “malicious damage” done to the image and reputation of entrepreneurs.

On the very same day, Alibaba announced a dramatic shake-up that will see its business empire split up into six business groups, with public listings planned for five of them.

The historic governance overhaul gave its shares in New York and Hong Kong an immediate shot in the arm. But the announcement also triggered fears among its 240,000 employees of potentially substantial lay-offs, sources told Nikkei Asia.