Asia Tea Time - Cup 60 ☕

This week I talk China’s 618 sales numbers, understanding your investment exposure, and Hong Kong’s new typhoon trading hours.

Macro in Asia

China’s “618” shopping festival sees first sales decline in 8 years

China’s e-commerce sector suffered a setback when news came out that the mid-year “618” online shopping festival suffered its first sales decline in eight years.

Retail data provider Syntun said its estimates suggested that sales during the 618 festival fell 7% from last year to RMB 742.8 billion (US$102.3 billion).

Why it’s happening

• China’s consumer economy is going through a rough spell so news that the 618 festival – named after 18 June and the second-biggest online shopping festival after 11.11 – saw a decline wasn’t a massive surprise.

• Serious discounting was on offer during this year’s 618 festival. With stagnating prices in China generally, weak consumer sentiment is obvious in all areas of the spending. 

Why it matters

• Weak inflation is a serious problem in China as the latest consumer inflation data saw prices in China rise just 0.3% year-on-year in June. 

• A lot of China’s biggest listed companies are involved in China’s e-commerce sector, from the likes of JD.com and Alibaba to Pinduoduo and Meituan Dianping.

What’s next?

• Watch out for whether price rise remain where they are or whether some sort of stimulus is forthcoming from China’s central government to help get inflation higher.

Tim’s Take 

Everyone is always scared of rising prices and the impact of inflation.

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In China, though, deflation is the real cause of concern. It’s one big reason why monetary policy has remained loose in the world’s second-largest economy and also why Chinese bonds are among the best-performing bonds in the world so far in 2024.

Unfortunately, the same can’t be said about Chinese stocks. Indeed, many of the e-commerce players have seen their share prices falter as consumer sentiment remains incredibly weak.

It was a rather mixed picture for retailers during the 618 festival, with JD.com saying its turnover and order volumes reached a new high during the festival.

That masks a big difference in share price performance. JD and Alibaba shares are both down double-digit percentages over the past year.

Compare that to Pinduoduo, which is taking market share and growing its international presence via Temu. Its shares have risen close to 100% over the past 12 months.

E-commerce is a fiercely competitive industry in China and while there may be small victories for some big firms during these festivals, it’s going to be the “long game” that matters most.

For investors, it’s a sobering reminder of how weak China’s consumer economy really is.

Tim's money tip of the week

Understanding your exposure to what you’re invested in is critical to your long-term success. Remember that every individual is going to have a different risk profile and attitude towards investing.

What works for one person isn’t going to work for the next. However, if you are building your own portfolio using exchange-traded funds (ETFs), it’s best to know what the components are.

Just like anything you put into your weekly shopping basket, you need to make sure there’s not too much replication.

For example, having an S&P 500 ETF of the biggest stocks in the US, as well as owning a Nasdaq-100 ETF of the country’s biggest tech stocks could be exposing you to concentration risk.

That’s because the S&P 500 ETF already has an estimated 30% exposure to technology and tech-related stocks.

So, understand what’s actually in your ETFs and allocate your money according to where you can get the broadest investment exposure at the lowest cost.

Story of the week

Hong Kong’s stock exchange, the Hong Kong Exchange (HKEX), will continue trading during typhoons from 23 September this year.

Previously, the city’s stock exchange would close during a Typhoon 8 (T8) signal or above, causing disruption to global investors.

This will end the decades-long practice and ensure the city’s US$4.2 trillion stock market remains open for business, no matter the weather.