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China price wars help spark US$157 billion rout in mainland consumer stocks as Alibaba, Yum China and BYD drag the market
- Gauges of consumer stocks have been the worst performers on the MSCI China Index since the end of September 2023
- The biggest drags on the MSCI benchmark in that span include Alibaba, Yum China and BYD, which have all been offering big discounts
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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.
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From electric vehicles (EVs) to fast food, companies are engaging in a battle of promotions aimed at luring customers who are spooked by 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 streak since 2009, deepening concerns about companies’ profits and share prices.
“That’s all symbolic of a very weak consumption environment that includes lack of consumer confidence and weak income growth,” said Ng Xin-yao, an investment director for Asian equities at abrdn. “We are cautious on fourth-quarter earnings across most sectors, and would assume that continues in the first quarter unless the government starts doing something massive to support the economy.”
Gauges of consumer stocks have been the worst performers on the MSCI China Index since 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 US$157 billion since.
The biggest drags on the MSCI benchmark in that span include e-commerce giant Alibaba Group Holding, restaurant operator Yum China Holdings and EV maker BYD Co – which have all been offering big discounts. Alibaba owns the South China Morning Post.
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