The world’s second-largest stock market has started 2024 on a dismal note, with the MSCI China gauge already down more than 4 per cent so far this year. It capped a third straight annual decline in 2023.
“The 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,” said Daisy Li, a fund manager at EFG Asset Management HK.
Tesla cuts prices in China to keep grip on premium EV market
Tesla cuts prices in China to keep grip on premium EV market
“Retail prices are falling fast,” Morgan Stanley analysts wrote in their 2024 outlook report for the Chinese EV sector. “While local brands, in general, have fared better than luxury and foreign brands in terms of widening discounts, we expect discounts to further widen into the first quarter this year on the back of seasonality effects.”
Many economy and market observers are hoping for interest-rate cuts and government spending to help prevent the nation from entering a deflationary spiral.
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A Morgan Stanley survey conducted late last month suggests seasonally better consumer sentiment ahead of the holidays. However, “sustainability is in doubt amid slowing economic recovery”, analysts including Lillian Lou wrote in a note.
Salary 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 per cent.
Fast-food companies are still locked in a protracted fight for customers, with some offering full meals for around US$3. It is difficult to make money at such low prices.
“We expect industry margins to erode until the irrational price war ends,” Kevin Yin, an analyst at JPMorgan Chase & Co., wrote in a note, while cutting estimates for Yum China. “No player is immune” to the headwinds created by the nation’s slowing demand growth, he said.