1. China’s inflation came in lower than expected in October, fanning worries of deflation once again.
The October consumer price index (CPI) fell 0.2% year-on-year compared with an expected 0.1% decline. That also compared with a slight 0.1% gain in the CPI for September 2023, which points to softening prices across the board. Producer price index (PPI) fell 2.6% year-on-year, a worsening from the 2.5% decline suffered in September, as China’s manufacturing sector struggles with a more challenging global and domestic demand. Shortly after the CPI data came out, news hit the wires of various directors from China’s National Administration of Financial Regulation rushing to meet this afternoon. Beijing is under enormous pressure to stimulate domestic demand. $Global X China Financials ETF(CHIX)$
2. The sovereign wealth fund of Qatar is looking at opportunities to invest in China’s enormous domestic economy.
The Qatar Investment Authority (QIA), a $450 billion sovereign wealth fund of the oil-rich Mideast nation, is reviewing investment opportunities in China’s retail, healthcare, technology, and logistics sector. This follows news last month of Saudi Arabia’s Ministry of Investment planning to open an office in the Greater Bay Area, while members of the UAE’s sovereign wealth fund, Mubadala Investment Company, visited in April pledging to increase investments in China. Another massive SWF, the $853 billion Abu Dhabi Investment Authority, has been steadily increasing its exposure in China. From just 4.5% in 2019, the fund now has 22.9% of its assets exposed to China, which continues to grow. These Mideast nations obviously know where the growth is. $iShares MSCI China ETF(MCHI)$ $KraneShares Bosera MSCI China A 50 Connect Index ETF(KBA)$ $KraneShares CICC China Leaders 100 Index ETF(KFYP)$ $CSI China Internet ETF(KWEB)$ $Alibaba(BABA)$ $Alibaba(09988)$ $Tencent(00700)$ $Tencent Holding Ltd.(TCEHY)$ $JD.com(JD)$ $JD-SW(09618)$ $MEITUAN-W(03690)$ $MEITUAN(MPNGY)$ $Pinduoduo Inc.(PDD)$
3. Cloud computing company Citrix is closing down its China operations citing a difficult operating environment.
The company, owned by Cloud Software Group, plans to cease all new commercial transactions in China, including Hong Kong and Macau, effective December 3. Companies operating in the field of data in China have faced increased compliance costs following Beijing’s implementation of the Data Security Law in 2021, which seeks to safeguard sensitive domestic data that could jeopardize national security. However, realizing the negative impact that the new law had on businesses, China’s data regulators issued new guidelines that exempt export of data generated by trade, academic, cross-border manufacturing, and marketing activities. Still, many companies would rather err on the side of caution. $Citrix(CTXS)$ $Kingsoft Cloud Holdings Ltd(KC)$
4. Chinese EV startup Li Auto reports better-than-expected 3rd quarter results.
The company reported positive adjusted EPS of $0.48 compared with a loss of $0.17 the same period a year ago. The market was expecting just $0.24 for adjusted EPS, making this a massive beat in profitability, which defies the ongoing concerns about profitability due to the price war in China’s EV market. Li Auto has been registering one record month of deliveries after another in China, with 3rd quarter deliveries hitting 105,108 units, up 4X from the 26,524 units delivered the same quarter last year. Vehicle margin for the period nearly doubled from 12.0% to 21.2% on a year-on-year comparison, while gross margins came in at 22.0% vs. 12.7% last year and better than the 21.8% gross margins in 2Q23. As result, Li Auto generated $1.81 billion in free cash flow in the quarter, up 37% quarter-on-quarter. $Li Auto(LI)$ $LI AUTO-W(02015)$ $XPeng Inc.(XPEV)$ $XPENG-W(09868)$ $NIO Inc.(NIO)$ $NIO Inc.(NIO.SI)$ $NIO-SW(09866)$ $BYD Co., Ltd.(BYDDF)$ $BYD COMPANY(01211)$ $GEELY AUTO(00175)$ $Geely Automobile Holdings Ltd.(GELYY)$ $Tesla Motors(TSLA)$
5. Chinese Twitter-like social media platform Weibo announces strong 3rd quarter results.
The company reported net revenues of $442 million, down 2.4% year-on-year, but roughly in-line with the $446 million the market was expecting. Adjusted EPS came in at $0.57, which beat market expectations of just $0.55 earnings per share. Advertising and marketing revenues slid 1% to $389.3 million, while value-added services (VAS) revenue fell 12% to $52.9 million. Monthly active users (MAUs) grew 21 million over the past year to reach 605 million as of end-September, while daily active users (DAUs) added 8 million to hit 260 million by the end of the 3rd quarter. These results reflect a challenging environment for the company following several years of regulatory tightening in use of social media and in-app gaming services. Weibo last month announced it would deny anonymity of online commentators with more than 500,000 followers, as it faces pressure from Beijing to prevent spread of misinformation. $Weibo(WB)$
https://twitter.com/BrianTycangco/status/1722568380207796561
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