Dispatch Asia: M&A Activity, Tainted Chinese Goods and Stock Turmoil

It’s been a busy month on the international trade front as U.S. officials take a harder look at Chinese imports following reports of tainted consumer products. Meanwhile, China’s economic engine continues to roar despite worries that the economy will overheat and trigger widespread inflation in the region.

In Japan, investors are waiting to see if Fast Retailing makes its unsolicited offer for Barneys New York an official, binding offer. Presumably, the company is doing due diligence on Barneys, but so far the retailer has kept mum.

Two weeks ago, WWD reported that third-party bidders had until July 22 to make an offer for Barneys New York. Fast Retailing has an unsolicited, $896 million bid for the luxury retailer. The official bid on the table is a $825 million offer from Dubai investment firm Istithmar, which was announced in June.

“The Istithmar offer… is expected to go through, barring an announcement that negotiations with Fast Retailing have resulted in a binding offer,” WWD reported earlier this month. “Fast Retailing and Jones have until Aug. 11 to conclude negotiations.”

In the broader apparel market, product safety oversight is developing into a more important topic in Washington after a host of contaminated products from China entered the U.S. market. Regulations for apparel importers could be impacted, according to a report from WWD earlier this month.

Importers are concerned that the “heightened attention on product safety” may add to the pressure in Washington to “rein in imports from China.” U.S.-based textile suppliers are supporting efforts to tighten restrictions on imports, and say foreign companies should be held to the same safety standards as U.S. producers.

These lobbying efforts follow several months of U.S. crackdowns on contaminated food from China, which triggered hearings and legislation to tackle the issue.

Meanwhile, there is growing concern in China that its booming economy will overheat, and this has the country’s stock market in a state of flux as investors flood the market. WWD recently reported that “an average of 440,000 individual trading accounts were opened per day in May, and 271,000 per day in June.”

The bulk of these individual trading accounts are classified as small investors, who tend to focus on short-term speculation. “Right now is a period of intense speculation,” said Access Asia director Paul French in the WWD report. “The price is rising, so people are moving in to speculate. However, everyone quotes the number of trading accounts opened, but a vast amount of those are dead. Most people will open them, not do well, and move out. Also, people do open multiple accounts to manipulate the market. What we think — that everyone is piling in — it is not as serious. Some people are in and out.”