HSBC Research issued a report lowering $小米集团-W(01810)$ Xiaomi Group's net profit forecast for 2022 to 2023 by 4% to 8% to reflect slower growth in Internet services and higher operating costs in its auto business. The report underestimated the increased competition in the smartphone market and stricter regulation of the Internet amid a weakening macro economy.
Xiaomi shares have adjusted 13% year-to-date as investment sentiment has turned sour faster than previously expected. The bank cut its forecast for Xiaomi's smartphone shipments to 212 million units from 222 million in 2022 and expects flat YoY growth in shipments in China, with the main incremental volume coming from overseas.
The bank believes that operating costs could rise significantly by more than $4 billion per year over the next two to three years. Therefore, the operating cost assumptions for 2022 to 2023 are raised by about 7% to 11%.
I think anyone trying to predict when the regulators will take a pause and let some dust settle is being foolish. Even confidence that this isn’t a new normal is misguided. If it is convinced that growth can be sustained while taking a much more active redistributive approach, and/or restricting platform leveraging to allow smaller fish to thrive, they’re likely to do so. I would bet they’ll continue letting emerging technologies grow with minimal encumbrance to the extent they don’t raise security concerns, then regulating more heavily once those reach maturity.
Foreign investment in China has had massive positive influence on life for the average Chinese person. Cutting that off is not going to help them long term. I believe they understand that.
In terms of 2022, I’d be assuming this is an important year for China to demonstrate he puts consumers and workers first.
So yes, could be a rocky year. I think this is overly optimistic about how much the Party cares about foreign capital - it’s an interest competing amongst
many, not the overwhelmingly important driver we saw up to the early 2010s or so.
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