Week in Review
- Asian equities were mixed for the week as the US recession fears gripped the region. India and Korea outperformed with gains, while Hong Kong and Indonesia underperformed.
- The Central Committee and State Council released an “Action Plan for Boosting Consumption” on Monday, which includes support for both real estate and stocks.
- Industrial production and retail sales data for the first two months of the year, released this week, indicated stronger-than-expected year-over-year growth, likely delaying rate cuts from China’s central bank.
- Tencent, Meituan, and PDD all reported earnings this week. Tencent and Meituan beat expectations, while PDD missed on top-line revenue, though it beat on profit.
Meituan Q4 Earnings Overview
After the close in Hong Kong, food and restaurant delivery company Meituan (3690 HK) reported Q4 financial results. The company’s press release provides an insight into China’s economy, noting that “thanks to further online penetration and strong consumer demand,” the “on-demand delivery business experienced steady growth.” During the earnings call, the company said it would invest in AI, drone delivery, and self-driving trucks. The first analyst question was on AI. Chairman & CEO Xing Wang responded: “So, of course, everyone is very concerned about AI.” He referenced that their in-house large language model has improved customer service and business development by allowing more targeted work. Meituan has also successfully launched in Saudi Arabia.
The company provides an interesting look at the detachment of fundamentals from the stock price. In 2019, Meituan generated RMB 97.53 billion worth of revenue, as the stock was trading at HKD 102.5 at year-end. The stock traded at an all-time high of HKD 451.40 on February 17, 2021, falling to a low of HKD 65.40 on January 31, 2024. Big picture: the company has tripled revenue since 2019 but is at 1/3rd of the all-time high! The company’s P/E is 26.55 (forward P/E is 17.92) versus US-listed Doordash’s P/E of 246 and India-listed Zomato’s P/E of 554.
- Revenues increased +20.1% to RMB 88.487B from Q4 2023’s RMB 73.695B versus analyst expectations of RMB 87.9B
- Adjusted Net Income increased +125.1% to RMB 9.848 from Q4 2023’s RMB 4.374B versus analysts expectations of RMB 9.9B
- Adjusted EPS increased +131% to RMB 1.63 from Q4 2023’s RMB 0.71 versus analyst expectations of RMB 1.57
- Cash/cash equivalents increased to RMB 70.834B from Q4 2023’s RMB 33.339B
- The company used HK $28.158B to repurchase 261,396,700 shares in 2024
Key News
Asian equities were mixed. Hong Kong and Mainland China saw another day of profit-taking due to a lack of catalysts, though Indonesia also had a rough night. It felt quiet overnight, though maybe traders skipped town early for the big F1 race in Shanghai this weekend.
Trump’s April 2nd tariff festival appears to be weighing on investor sentiment as investors lock in profits. Montana Senator Steve Daines is visiting Chinese government officials in Beijing today, which is a good sign, though you would never know it due to the complete lack of Western media coverage of his visit. He is the first US government official to visit China since President Trump’s reelection.
While no good news on China ever appears to be fit to print, all negative news must be printed, as Musk’s Pentagon visit front page news. However, Bloomberg News is reporting that US Trade Representative Jamieson Greer will speak with Chinese government officials, commenting that “Trump officials are open to a new trade deal, with a possible face-to-face meeting between Trump and Chinese President Xi Jinping”. Remember, we’ve heard the chatter, though it remains unconfirmed, that Xi will visit Washington, DC, in June.
My Hong Kong stock market heat map from last night looks more like a bloodbath. BYD shares fell -7.69% on an investigation of their Hungary plant by the European Union, which hit autos and electric vehicle (EV) ecosystem names, though many of them report Q4 on Monday. Semiconductor Manufacturing International (SMIC) fell -7.49%. Precious metals names were hit, as Zijin Mining fell -4.95%. Xiaomi fell -3.19%, Tencent fell -1.54%, and Alibaba fell -3.54%. The selling overnight was fairly indiscriminate, as profits were locked in across sectors. Banks, insurance companies, and brokerages were not spared. Liquor names were off, as Kweichow Moutai fell. Semiconductors, chemicals, and software were all off.
We noted yesterday how the Shanghai, Shenzhen, Hang Seng, and Hang Seng Tech indexes were all at big round numbers (3,400; 2,100; 25,000; and 6,000, respectively). The profit-taking has driven the stocks below those levels, with support levels not far.
The quarterly Monetary Policy Committee of the People’s Bank of China (PBOC), China’s central bank, met, stating it would “increase the intensity of monetary policy regulation” and reduce the bank reserve requirement ratio and interest rates based on “domestic and foreign economic” conditions, i.e. when the US Fed cuts, the PBOC will cut.
Mainland media noted how consumer loan interest rates for creditworthy customers have fallen to 2.42%. This could also be a catalyst for consumption, though China’s consumers, and regulators for that matter, have historically been conservative when it comes to consumer credit.
The US government agreed to negotiate with both China and Canada at the World Trade Organization (WTO) following the disputes filed by the latter.
The Hang Seng and Hang Seng Tech indexes fell -2.19% and -3.37%, respectively, on volume that increased +15% from yesterday, which is 206% of the 1-year average. 82 stocks advanced, while 402 stocks declined. Main Board short turnover increased +14% from yesterday, which is 212% of the 1-year average, as 16% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value factor and large caps “outperformed” (i.e. fell less than) the growth factor and small caps. All sectors were negative, led lower by Health Care, which fell -0.62%, Materials, which fell -3.75%, and Consumer Discretionary, which fell -3.35%. The top-performing subsectors were construction materials, consumer durables, and apparel. Meanwhile, consumer services, semiconductors, and autos were among the worst-performing subsectors. Southbound Stock Connect volumes were 3X pre-stimulus levels, as Mainland investors bought a net $291 million worth of Hong Kong-listed stocks and ETFs, including China Mobile. However, SMIC, Xpeng, Tencent, Kuaishou, Meituan, Alibaba, and BYD were all net sold within the program.
Shanghai, Shenzhen, and the STAR Board all closed lower by -1.29%, -1.81%, and -2.06%, respectively, on volume that increased by +7.74% from yesterday, which is 130% of the 1-year average. 793 stocks advanced, while 4,247 stocks declined. Value stocks and small caps “outperformed” (i.e. fell less than) growth stocks and large caps. All sectors were negative, led lower by Consumer Discretionary, which fell -2.87%, Information Technology, which fell -2.36%, and Materials, which fell -1.64%. The top-performing subsectors were energy equipment, steel, and ports. Meanwhile, autos, leisure products, and computer hardware were among the worst-performing subsectors. Northbound Stock Connect volumes were above average. CNY and the Asia Dollar Index both managed small gains versus the US dollar. Treasury bond prices fell. Copper fell, and steel rose.
Live Webinar
Join us on Thursday, March 13, 2025 at 10 am EDT for:
The Future of Carbon in the Trump Era
Please click here to register
New Content
Read our latest article:
2025 China Outlook: A Recipe For Re-Rating
Please click here to read
Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.25 versus 7.25 yesterday
- CNY per EUR 7.85 versus 7.86 yesterday
- Yield on 10-Year Government Bond 1.85% versus 1.83% yesterday
- Yield on 10-Year China Development Bank Bond 1.88% versus 1.87% yesterday
- Copper Price -0.27%
- Steel Price 0.25%
Read the full article here
