China’s Tech Giants’ Earnings and Singles’ Day Sales Reveal Fragile Economy
Earnings for China’s tech giants will shed light on how the country’s consumers fared last quarter in a fragile economy, supplemented by a more immediate indicator as the Singles’ Day shopping extravaganza kicks off this weekend.
China slid back into deflation in October — consumer prices fell 0.2% after hovering near zero for two months — highlighting the country’s struggle to shore up growth through domestic consumption. That’s despite economic growth of 4.9% year-on-year in the third quarter.
That sets the tone for reports from Alibaba Group Holding Ltd., JD.com Inc., and Tencent Holdings Ltd. The big test for them will be Singles’ Day on Saturday, the world’s most significant shopping festival. Alibaba and JD.com had record Singles’ Day sales of 889.4 billion yuan ($122 billion) in 2021. They didn’t publish sales figures for the first time last year as China was navigating pandemic headwinds.
Over in Japan, major lenders Mizuho Financial Group Inc, Mitsubishi UFJ Financial Group Inc., and Sumitomo Mitsui Financial Group Inc. also announce results. That’s right on the heels of a rout in bank stocks this week as bond yields eased and investors digested the implications of the Bank of Japan’s recent policy tweaks. Federal Reserve Chair Jerome Powell said the US won’t hesitate to tighten policy further if needed to contain inflation, which may put more pressure on Japanese markets.
Key Highlights:
Mizuho Financial Group Inc.: Net income for Mizuho Financial Group Inc is expected to have fallen 22% according to consensus estimates. The main banking unit plans to raise deposit rates, following its competitors. Additionally, Mizuho plans to invest an additional $576 million in Rakuten Securities to boost its retail business.
Mitsubishi UFJ Financial Group Inc.: The net income for Mitsubishi UFJ Financial Group Inc. is expected to have more than doubled off a weak quarter a year earlier, benefiting from higher interest rates globally. The Bank of Japan’s moves to allow domestic yields to move upward also contribute to its growth. Mitsubishi UFJ Financial Group has already raised the return on 10-year deposits to 0.2%, following the Federal Reserve’s tightening policies. Sumitomo Mitsui Financial Group Inc. is also expected to raise its 10-year deposit rate to 0.2%.
Tencent Holdings Ltd.: Tencent’s third-quarter performance is expected to be strong, fueled by domestic games revenue growth. Operating profit is forecasted to jump by 24% from an already high base. Advertising revenue is also expected to see growth, with online advertising revenue increasing by 22% and games revenue climbing 8.8%.
Alibaba Group Holding Ltd.: Alibaba’s quarterly net income is projected to more than triple. The company is poised to emerge as one of China’s long-term AI winners, following the launch of its enhanced version of the generic AI large language model Tongyi Qianwen 2.0. With the upcoming Singles’ Day, Alibaba is estimated to see gross merchandise value grow between 1.8% to 5.5% to at least 550 billion yuan. This growth is expected due to promotional efforts and collaboration with WeChat.
As earnings reports and the Singles’ Day sales unfold, they will provide valuable insights into the state of China’s economy and consumer sentiment. The Fragile Economy in China, marked by deflation and the struggle to bolster growth through domestic consumption, will be further examined through these key indicators. Additionally, investors will closely watch the results from major Japanese banks amidst recent policy tweaks and the potential impact of the US Federal Reserve’s tightening measures.
Disclaimer: The above article is for informational purposes only. This article is not intended as investment advice. Seek professional advice before making investment decisions.
