Connect with us
Finance Digest is a leading online platform for finance and business news, providing insights on banking, finance, technology, investing,trading, insurance, fintech, and more. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.
NEWS

Long and tedious journey’: companies sour on China outlook

Published On :

‘Long and tedious journey’: companies sour on China outlook

By Helen Reid, Emma Rumney and Ananya Mariam Rajesh

(Reuters) – Some of the world’s top food, drinks and tech companies have struck a sour tone about Chinese demand, deepening investor worries about damage to firms exposed to the country and Beijing’s ability to revive the world’s second-biggest economy.

The downbeat comments from companies including Starbucks, Pandora and Carlsberg as they report fourth-quarter results come ahead of China’s Lunar New Year holiday, usually a busy period for consumer spending.

They highlight the scale of the challenge for companies selling everything from phones to cars and necklaces as Chinese consumers tighten their belts amid uncertain employment prospects, especially for younger people, a plunging stock market and declining property values.

Those problems derailed expectations for a strong post-pandemic rebound last year.

“I think it’s going to be a long and tedious journey,” in China, Pandora CEO Alexander Lacik told Reuters on Wednesday after its fourth-quarter sales missed expectations.

“People ask me why do you bother, it’s 2% of your revenue base. That’s one way to look at it, but if you then say it’s 1.4 billion people, it’s the largest jewellery market in the world, then you get a different perspective,” he said.

Carlsberg CEO Jacob Aarup-Andersen said he was “cautiously optimistic” the subdued conditions would stabilise over the year, which should also boost other economies in southeast Asia. But he wouldn’t predict when a Chinese recovery would come.

The world’s leading industrial gases company, Linde was equally muted, saying a lack of momentum over the past year had continued into 2024.

“Our view is you will see continued mild recovery probably through the first half of the year, and then the second half, we’ll have to just watch and see what happens,” CEO Sanjiv Lamba said.

Underscoring worries about the tepid start to 2024, data on Wednesday showed sales in China of electrified vehicles fell 38.8% in January from the previous month, the first such drop since August 2023.

In the run-up to the Lunar New Year holidays, China’s stock markets have hit five-year lows as the struggling economy and a lack of forceful government stimulus measures take their toll on confidence.

After decades of red-hot growth, the prolonged sluggish outlook has prompted some investors to re-evaluate their exposure to companies reliant on China.

“(China) is not the growth story of the last couple of decades,” said ZCM senior portfolio manager Don Nesbitt, noting stiff competition for Apple from local rivals in its third-largest market and upstart online retailers Temu.com and Shein snapping at Amazon’s heels.

BARGAINS

Cash-strapped consumers seeking bargains have also turned the tables on some of China’s own best-known brands.

On Wednesday, Alibaba Group Holding delivered weaker-than-expected quarterly revenue, hurt by softness in the retail market and a sagging economic recovery.

The company is facing competition from low-cost domestic e-commerce players such as PDD Holdings.

U.S. and European companies have also been hit by rising local players.

Starbucks CEO Laxman Narasimhan said: “In China, we remain very confident in the long term. The market is going through a transition as we see an increase in mass market competitors, which we believe will shake out over time.”

Underscoring the need to woo picky customers, Carlsberg, the world’s third-largest brewer pledged to increase sales and marketing spending by over 10% this year, with most of that dedicated to China and Vietnam. The maker of Kronenbourg 1664 also said it would put more focus on its local brands in China.

Companies like Carlsberg may be better positioned than others reliant on more discretionary spending by Chinese customers, Berndt Maisch, a fund manager at Carlsberg shareholder Tresides Asset Management.

But there may be a longer term shift underway, said Stephen Lee, portfolio manager at Logan Capital, which holds shares in Estee Lauder and Apple.

“There may be an emerging preference for domestic brands versus global brands from the Chinese consumer and it’s something that does seem the government is comfortable with encouraging,” he said.

 

(Reporting by Helen Reid and Emma Rumney in London, Additional reporting by Andrey Sychev in GDANSK, Writing by Josephine Mason in London, Editing by Mark Potter and Catherine Evans)

Continue Reading

Why pay for news and opinions when you can get them for free?

       Subscribe for free now!


By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Posts