{"id":1450694,"date":"2024-01-15T15:15:00","date_gmt":"2024-01-15T20:15:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1450694"},"modified":"2024-01-15T15:15:00","modified_gmt":"2024-01-15T20:15:00","slug":"price-wars-spark-rout-in-chinas-consumer-sector","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/price-wars-spark-rout-in-chinas-consumer-sector\/1450694\/","title":{"rendered":"Price Wars Spark Rout In China’s Consumer Sector"},"content":{"rendered":"

Price Wars Spark Rout In China’s Consumer Sector<\/span><\/p>\n

\n

By Charlotte Yang, Bloomberg Markets Live reporter and strategist<\/em><\/p>\n

The seemingly relentless decline in prices of Chinese goods amid tepid consumer demand is denting expectations that corporate earnings can revive the flagging stock market.<\/p>\n

From electric vehicles to fast food, companies are engaging in a battle of promotions aimed at luring customers who are\u00a0spooked\u00a0by dim job prospects and have seen a persistent property slump hurt wealth creation. Consumer prices fell for a third-straight month in December, the longest\u00a0streak\u00a0since 2009, deepening concerns about companies\u2019 profits and share prices. <\/strong><\/p>\n

\u201cThat\u2019s all symbolic of a very weak consumption environment that includes lack of consumer confidence and weak income growth,\u201d said\u00a0Xin-Yao Ng, an investment director for Asian equities at abrdn. \u201cWe are cautious on 4Q earnings across most sectors, and would assume that continues in 1Q unless the government starts doing something massive to support the economy.\u201d<\/p>\n

<\/a><\/p>\n

Gauges of consumer stocks have been the worst performers on the\u00a0MSCI China Index\u00a0since the end of September, after the real estate measure. The aggregate market value of companies included in the two consumer indexes has fallen by about $157 billion since. And the biggest drags on the MSCI benchmark in this span include e-commerce giant\u00a0Alibaba Group Holding Ltd., restaurant operator\u00a0Yum China Holdings Inc.\u00a0and EV maker\u00a0BYD Co.\u00a0\u2014 which have all been offering big discounts.<\/p>\n

The world\u2019s second-largest stock market has started 2024 on a\u00a0dismal note, with the MSCI China gauge already down more than 4% so far this year. It capped a third straight annual decline in 2023.<\/p>\n

\u201cThe bigger picture is that the weak demand is leading to a deflationary environment, which particularly bodes ill for businesses that cannot achieve higher volumes with lower prices,\u201d said\u00a0Daisy Li, a fund manager at EFG Asset Management HK Ltd.<\/p>\n

The EV industry has been among the\u00a0worst hit\u00a0by intense competition as growth slows, with Chinese makers following the lead of Tesla Inc. in lowering prices to boost sales. BYD and local peers including\u00a0Xpeng Inc.\u00a0and\u00a0Li Auto Inc.\u00a0have shed\u00a0billions\u00a0of dollars in market value in the past few months.<\/p>\n

\u201cRetail prices are falling fast,\u201d Morgan Stanley analysts wrote in their 2024 outlook report for the Chinese EV sector. \u201cWhile local brands, in general, have fared better than luxury and foreign brands in terms of widening discounts, we expect discounts to further widen into 1Q24 on the back of seasonality effects.\u201d<\/p>\n

Even China\u2019s vaunted internet giants have been impacted, with Alibaba and\u00a0JD.com Inc.\u00a0seeing their stock prices tumble as they wage a fierce\u00a0battle\u00a0for market share. The price war has made US-listed PDD Holdings Inc., operator of discount site Temu, one of the rare\u00a0bright spots\u00a0in China\u2019s e-commerce industry.<\/p>\n

Many economy and market observers are hoping for\u00a0interest-rate cuts\u00a0and government spending to help prevent the nation from entering a deflationary spiral.<\/p>\n

Fund managers say the next catalyst they are watching is pricing and sales data around Chinese New Year in February, which will offer more clues on consumer confidence. The next few weeks may also be key for policy action, given Chinese leaders will soon gear up for the National People\u2019s Congress. That annual legislative session, held in March, is where the government is expected to announce its official growth target for 2024.<\/p>\n

A Morgan Stanley survey conducted late last month suggests seasonally better consumer sentiment ahead of the holidays. However, \u201csustainability is in doubt amid slowing economic recovery,\u201d analysts including\u00a0Lillian Lou\u00a0wrote in a note.
\nSalary cuts and job losses have remained among the top concerns of households, they wrote, adding that the number of consumers anticipating the economy to worsen ticked up by two percentage points from November to 13%.<\/p>\n

In all, there is little hope for a quick fix. Citigroup Inc. expects consensus estimates to fall for\u00a0Li Ning Co.\u00a0and\u00a0Anta Sports Products Ltd.\u00a0around the upcoming results season, hurt by foreign competition and pushes into lower-tier cities with cheaper products.<\/p>\n

Fast-food companies are still locked in a protracted fight for customers, with some offering full meals for around $3. It\u2019s difficult to make money at such low prices.<\/p>\n

\u201cWe expect industry margins to erode until the irrational price war ends,\u201d\u00a0Kevin Yin, an analyst at JPMorgan Chase & Co., wrote in a note while cutting estimates for Yum China. \u201cNo player is immune\u201d to the headwinds created by the nation\u2019s slowing demand growth, he added.<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nMon, 01\/15\/2024 – 10:15<\/span><\/p>\n

\u200bRead More<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

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