2023-10-15 20:19:16
When a major consumer stock collapses to historic levels, it sends powerful signals that resonate far and wide. That’s what happened when shares of Chinese e-commerce group JD.com fell sharply, falling 12% on Friday.
On the same day, official data showed that China is teetering on the brink of financial recession, and the numbers tell a sad story for global investors. Consumer inflation held steady for September, defying expectations to rise, and factory prices fell by 2.5%, continuing to decline for the 12th month in a row, exacerbating concerns regarding weak demand and dampening hopes that shoppers in China will go on a “retaliatory” spending spree in the wake of… Prolonged closure due to “Covid 19”.
Although pandemic-related closures ended at the end of last year, the rebound has not materialized. The Golden Week holiday in China is considered a peak season for spending by the Chinese, but the data for this year’s holiday, which spanned 8 days and ended on October 6, painted a sad picture. Travel and spending data were below market and government expectations, and were far below pre-pandemic levels.
Also, the volume of spending on items such as movie tickets declined sharply, with the decline reaching regarding 40% compared to 2019. The volume of demand for travel abroad fell sharply, in particular, and the decline of the yuan increased travel costs, which meant a decline in the number of tourists. The Chinese are out of the country and spending levels are falling.
The above means that European stocks with exposure to the Chinese market will be affected, along with levels of tourism spending.
Also, shares of major e-commerce groups such as Alibaba and JD. Dot.com is trading at a level of 9 times recorded revenues, which is equivalent to a small fraction of its global counterparts. The significant reduction in prices and the provision of promotional discounts have always had an effective impact in enhancing its sales, but this year this strategy failed to attract and restore consumers.
Likewise, the extended growth of global companies’ sales to China’s growing middle class is at risk, and JD.com’s stock movements represent just a hint of what is to be expected across a wide range of sectors in the coming months.
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