Skip to main content

Featured Post

Market Daily Report: Bursa Malaysia Ends Higher In Line With Most Regional Markets

KUALA LUMPUR, Sept 20 (Bernama) -- Bursa Malaysia ended higher on Friday in line with most Asian markets, mirroring gains from Wall Street, where investors welcomed the US Federal Reserve's substantial interest rate cut. The FTSE Bursa Malaysia KLCI (FBM KLCI) rose by 3.17 points, or 0.19 per cent, to 1,668.82 at the close from Thursday's close of 1,665.65. It opened 5.03 points higher at 1,670.68, trading between 1,668.48 and 1,674.04 throughout the session. In the broader market, gainers outpaced decliners 732 to 468, while 465 counters were unchanged, 850 untraded and 32 suspended. Turnover swelled to 4.19 billion units worth RM5.97 billion, from Thursday's 3.99 billion units worth RM4.08 billion. UOB Kay Hian Wealth Advisors head of investment research, Mohd Sedek Jantan, noted the FBM KLCI's gains were led by utilities, logistics, and banking stocks, reflecting improved market sentiment. Additiona
Post a Comment

China’s Consumer Spending Slump Threatens Global Brands

President Xi Jinping's administration is under intensifying pressure to address the downturn in China's consumer spending, which has emerged as a significant threat to global economic stability.


Alarming Economic Indicators

  • Services Activity: A critical gauge of Chinese services activity, covering the retail sector, teetered on the edge of contraction in July for the first time since last year. This is part of a broader disappointing economic picture revealed by recent purchasing manager indexes.
  • Deflationary Pressures: Persistent deflationary pressures are evident, not just in manufacturing but across various sectors.

Impact on Global Brands

  • Consumption's Role: For the first time since late 2022, consumption contributed less than half to China’s US$17 trillion economy in the second quarter.
  • Affected Brands: The consumer spending slump has hit global brands like Starbucks, L'Oréal, and Japan's Fast Retailing, leading to declining sales and stock valuations.

Economic and Political Reactions

  • Consumer Spending Focus: The Politburo has vowed to make boosting consumer spending a greater policy focus for the rest of the year. However, there is skepticism among investors due to a lack of detailed plans.
  • Manufacturing and Exports: Despite promises to boost consumption, manufacturing and exports remain vital to China’s economic recovery.

Contributing Factors

  • Housing Slump: A prolonged housing slump has significantly impacted household budgets, leading to reduced spending.
  • Wealth Tied to Real Estate: JPMorgan Chase & Co estimates that China’s urban middle class has about 60% of their wealth tied to real estate, further contributing to cautious spending habits.

Global Brands' Struggles

  • Competition and Thrift: Global brands are grappling with sluggish demand and competition from cheaper, local alternatives. Thriftier habits among Chinese consumers have hurt profits and share prices.
  • Starbucks: The coffee chain reported a faster-than-expected decline in same-store sales in China. It seeks a local partner to regain market share, having previously spent US$1.3 billion to buy back its domestic stores.
  • Luckin Coffee: Meanwhile, Luckin Coffee, a top local competitor, has attracted consumers with cheaper options.
  • L'Oréal: The French beauty-products giant posted a 2.4% sales drop in North Asia, marking the fourth consecutive quarter of falling sales in the region.
  • McDonald's: The burger chain reported a decline in same-store sales, noting that Chinese consumers are increasingly deal-seeking.

Future Outlook

Despite the Politburo’s pledges, there is uncertainty about whether these promises will translate into effective measures to stimulate consumer spending.

  • Investor Sentiment: Chinese consumer stocks soared following the Politburo’s announcements, but many investors remain unconvinced.
  • Wealth Effect: "The wealth effect is under pressure in China," said Nelson Yan, co-chief investment officer at Fosun Wealth International in Hong Kong. "Consumer downgrading is still around."

China’s consumer spending slump presents a complex challenge with significant implications for both domestic and global markets.

Labels:

Comments

Post a Comment

Popular posts from this blog

INTC Share Watch and News

Stock Info Market Monitor Company Profile Intel Corporation designs, manufactures, and sells integrated circuits for computing and communications industries worldwide. It offers microprocessor products used in notebooks, netbooks, desktops, servers, workstations, storage products, embedded applications, communications products, consumer electronics devices, and handhelds. The company also offers system on chip products that integrate its core processing functionalities with other system components, such as graphics, audio, and video, onto a single chip. It also provides chipset products that send data between the microprocessor and input, display, and storage devices, such as keyboard, mouse, monitor, hard drive, and CD or DVD drives; motherboards that has connectors for attaching devices to the bus, and products designed for desktop, server, and workstation platforms; and wired and wireless connectivity products, including network adapters and embedded wireless cards used to translat
1 comment
Read more

Analysts See Asset Resilience of Bank of Chengdu Benefiting Hong Leong Bank

Analysts predict that the asset quality of Bank of Chengdu, in which Hong Leong Bank Bhd holds a 19.76% stake, will remain robust due to its strict risk management policies and proactive measures. Key Takeaways: Strong Risk Management Practices : According to CIMB, Bank of Chengdu has adopted a conservative risk culture, performing thorough assessments of location, developer reputation, project viability, and management integrity before financing property projects. The bank closely monitors early warning signals like construction progress, sales progress, budget overruns, and fund usage by developers to mitigate potential risks. Proactive Measures Against Property Slowdown : The bank's precautionary measures allowed it to reduce exposure to problematic property loans and exit risky loans before China's property market slowdown. This conservative approach is expected to benefit Hong Leong Bank by minimizing potential asset quality concerns. Continued Optimism and Buy Recommendat
Post a Comment
Read more

Investors Keep Buying US Junk Debt Despite Weak Protections

  When US-based construction material supplier Wilsonart issued a junk bond to raise US$500 million (RM2.13 billion) for an acquisition this summer, a research firm warned potential investors about the bond's weak protections. The bond’s covenants could allow the company to move valuable assets to another entity and raise more money, potentially disadvantaging bond investors, according to Covenant Review , a research firm. This warning comes amid growing concerns in credit markets as more companies engage in practices like "liability management exercises," where they borrow more against the same assets. These practices, often favoring some creditors over others, have been dubbed "creditor-on-creditor violence," prompting some creditors to unite to protect their interests. Despite the warnings, investors eagerly purchased Wilsonart's offering, underscoring a paradox in US credit markets. While investors face the consequences of weak covenants, they continu
Post a Comment
Read more