Baidu Inc. posted a smaller-than-forecast drop in revenue after its online advertising business bounced back from the pandemic. The company said it will keep investing heavily in technology to boost growth, and the stock slipped in extended trading.
China’s leading search engine reported sales declined 1 per cent to 26.03 billion yuan (US$3.75 billion) in the June quarter, versus an average forecast for 25.7 billion yuan. Net income was 3.58 billion yuan, versus the 2 billion yuan projected, the company said Thursday in a statement.
Baidu is riding a gradual post-COVID 19 recovery in its home market but, at the same time, is trying to ward off increasingly aggressive competition in media and advertising from the likes of Tencent Holdings Ltd. and ByteDance Ltd. The company is diversifying ad revenue sources and investing in content for its Netflix-style iQiyi Inc. to keep users and marketers from migrating to hotter formats like ByteDance’s Douyin, TikTok’s local equivalent.
“With COVID-19 becoming more manageable in China, Baidu’s business is steadily rebounding,” Chief Executive Robin Li said in the statement. “We plan to continue heavy investments in technology to maximize Baidu’s future growth potential.”
What Bloomberg Intelligence Says
“Baidu’s 2Q online marketing sales could contract less than 1Q’s 19 per cent drop as the company emerges from the worst of China’s coronavirus outbreak. The second quarter has been seasonally strong for advertising in the past, and this time Baidu will benefit from the rebound in offline business activity and improved advertiser sentiment.”
– Vey-Sern Ling and Tiffany Tam, analysts
Once the runaway leader in desktop search, Baidu is trying to adapt its business to the mobile era but losing ground piecemeal to rivals such as ByteDance. To compete, it plans to offer subsidies to influencers and direct more traffic to them across its family of apps, including in live-streaming. Longer term, the search giant is investing in artificial intelligence technology, and betting on the commercialization of that through smart speakers and self-driving cars.
Rising geopolitical tensions are another source of concern. Baidu’s apps were among dozens of Chinese services targeted in India’s sweeping ban last month, while U.S. entities will soon be blocked from dealing with TikTok and Tencent’s WeChat. The U.S. Congress is moving closer to passing legislation that could effectively bar Chinese companies from trading on U.S. exchanges. Billionaire Baidu founder Li told state media earlier this year that the company is considering relisting in regions including Hong Kong.
Baidu’s U.S. shares fell about 7 per cent in extended trading following the report. The stock also came under pressure after Iqiyi disclosed Thursday after U.S. markets closed that the U.S. Securities and Exchange Commission is seeking some financial and operating records going back to 2018 and documents related to certain acquisitions and investments. Iqiyi, which is backed by Baidu, said it’s cooperating with the investigation. The company’s U.S. shares dropped as much as 19 per cent.
Baidu also said its board approved an increase of its share-repurchase program to $3 billion from $1 billion, effective through 2022.
Buffett-following investment trust to list in London – TheChronicleHerald.ca
LONDON (Reuters) – An investment trust following the principles of veteran U.S. investor Warren Buffett is to list in London, the trust said on Friday.
Buffettology Smaller Companies Investment Trust intends to raise a minimum of 100 million pounds ($127.52 million) via an initial public offering on the London Stock Exchange, it said in a statement.
The trust will mainly invest in companies listed or traded in Britain, through a portfolio of 30-50 companies with market
capitalisations from 20-500 million pounds.
Sanford DeLand will be the trust’s investment manager, led by Keith Ashworth-Lord, CIO of Sanford DeLand Asset Management.
Sanford DeLand manages around 1.4 billion pounds across two open-ended funds.
“The UK small cap market offers excellent investment
opportunities to experienced managers who know what to look for and have the freedom to take a long-term view,” Ashworth-Lord said.
(Reporting by Carolyn Cohn; Editing by Rachel Armstrong)
China expands investment scope for foreign investors under combined scheme – TheChronicleHerald.ca
By Luoyan Liu and Meg Shen
SHANGHAI/BEIJING (Reuters) – China moved to further ease foreign access to its capital markets on Friday, officially combining two major inbound investment schemes and broadening the scope for foreign institutional investment.
The finalised rules, published by The China Securities Regulatory Commission (CSRC), the central bank and the foreign exchange regulator, combine the Qualified Foreign Institutional Investor (QFII) scheme and its yuan-denominated sibling, RQFII. The schemes channel foreign capital into Chinese stocks and bonds.
The new rules, which will take effect on Nov. 1, would also expand investment scope under the combined scheme.
The rule changes “will fundamentally relieve major bottlenecks for foreign institutional investors seeking to invest in China” said Thomas Fang, head of China Global Markets at UBS.
The regulations “have the potential to not only galvanize investor interests in China, but also broaden (the) investor base in using financial and hedging instruments in China,” Fang said.
China is accelerating reforms and the opening-up of its capital markets as part of efforts to promote global use of the yuan currency while trade and diplomatic ties with the United States remain strained.
The announcement coincides with FTSE’s decision earlier in the day to include Chinese government bonds in its flagship World Government Bond Index.
The rules also lower the threshold for overseas applicants and simplify the vetting process.
Investors will be allowed to buy securities traded on Beijing’s New Third Board and invest in private funds or conduct bond repurchase transactions.
In addition, foreign institutions will also have access to derivatives, including financial futures, commodity futures and options, according to the new rules.
“The move will encourage more medium- and long-term funds, including hedge funds and alternative investment funds, to enter the Chinese market directly,” said Fang at UBS.
The draft rules were published in January 2019.
(Additional Reporting by Samuel Shen; Editing by Alex Richardson)
U.S. core capital goods orders beat expectations; business investment rebounding – TheChronicleHerald.ca
By Lucia Mutikani
WASHINGTON (Reuters) – New orders for key U.S.-made capital goods increased more than expected in August and demand for the prior month was stronger than previously estimated, suggesting a rebound in business spending on equipment was underway after a prolonged slump.
The upbeat report from the Commerce Department on Friday, however, did not change views that the economy’s recovery from the COVID-19 recession was slowing as government money to help businesses and tens of millions of unemployed Americans runs out. New coronavirus cases are rising in some parts of the country. That could crimp consumer spending, with retail sales already slowing.
Federal Reserve Chair Jerome Powell this week stressed the need for more fiscal stimulus, telling lawmakers on Thursday that it could make the difference between continued recovery and a much slower economic slog. Another rescue package appears unlikely before the Nov. 3 presidential election.
Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 1.8% last month, the Commerce Department said. Data for July was revised up to show these so-called core capital goods orders increasing 2.5% instead of 1.9% as previously estimated.
Economists polled by Reuters had forecast core capital goods orders gaining 0.5% in August.
Core capital goods orders last month were boosted by increased demand for machinery, primary metals, computers and electronic products. But orders for fabricated metal products and electrical equipment, appliances and components fell.
U.S. stocks fell. The dollar was higher against a basket of currencies. U.S. Treasury prices rose.
STRONG THIRD QUARTER EXPECTED
Shipments of core capital goods increased 1.5% last month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement. They advanced 2.8% in July. Business investment tumbled at a record 26% annualized rate in the second quarter, with spending on equipment collapsing at an all-time pace of 35.9%. Investment in equipment has contracted for five straight quarters.
Economic activity rebounded sharply over the summer as businesses reopened after mandatory closures in mid-March to slow the spread of the coronavirus. Gross domestic product is expected to rebound at as much as a record 32% annualized rate in the third quarter after tumbling at a 31.7% rate in the April-June period, the worst performance since the government started keeping records in 1947.
But fading fiscal stimulus is casting a cloud over growth prospects for the fourth quarter. Goldman Sachs on Wednesday cut its fourth-quarter GDP growth estimate to a 3% rate from a 6% pace, citing “lack of further fiscal support.”
Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, rose 0.4% in August after jumping 11.7% in July. Durable goods orders were supported by a 0.5% rise in orders for transportation equipment, though demand for motor vehicles and defense aircraft eased.
There were no orders for civilian aircraft reported for the second straight month in August.
Boeing has struggled with cancellations as airlines grapple with sharply reduced demand for air travel because of the pandemic. The grounding of Boeing’s best-selling 737 MAX jets since March 2019 after two crashes in Indonesia and Ethiopia has also weighed on the company.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)
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