China Market Update: Q1 Results From Meituan, PDD & Kuaishou
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Q1 Earnings Reports
Meituan (3690 HK) reported Q1 earnings after the Hong Kong close on Monday that beat analyst expectations. Management addressed the recent RMB 10B food delivery subsidies from JD.com and Alibaba's Ele.me, stating that after ten years of competition, Meituan is 'going to take whatever measure it takes to win the game.' The company has highlighted the recent success of Meituan's "Insta-shopping" in '3C home appliance, beauty and personal care, mom and child, pet care, daily necessity, and apparel.' The company will invest RMB 100B in food subsidy promotion plan over the next three years.
E-Commerce company PDD reported its Q1 earnings before the US market open today. 'In the first quarter, we made substantial investments in our platform ecosystem to support merchants and consumers amid rapid changes in the external environment,' said Mr. Lei Chen, Chairman and Co-Chief Executive Officer of PDD Holdings. The 'external environment' refers to the challenges Temu faces due to US tariffs and the elimination of the de minimis exemption. The investment in the core business weighed significantly on the bottom line. PDD did not mention relisting in Hong Kong on the management call, which is disappointing.
Online video Kuaishou (1024 HK) reported its Q1 earnings and attributed the strong results to its large video generation model called Kling AI, though adjusted EPS was a touch light.
Asian equities delivered a mixed performance overnight as the US dollar strengthened and Thailand underperformed among regional markets.
Hong Kong rebounded following Monday's weak trading session, which was driven by price wars in the electric vehicle (EV) and hybrid sectors after BYD Company Limited (BYD, -1.65% today, -8.6% yesterday) cut prices. Autos were mixed after yesterday's steep sell-off: Geely Automobile Holdings Limited (Geely, -1.74% today, -9.46% yesterday), Li Auto Inc. (Li Auto, +1.64% today, -3.17% yesterday), XPeng Inc. (XPeng, +0.27% today, -4.44% yesterday), and NIO Inc. (NIO, -2.06% today, -3% yesterday).
Internet stocks rebounded after yesterday's downdraft. Meituan (Meituan, +2.09% today, -5.48% yesterday) rose after reporting earnings following the Hong Kong close and on strong buying via Southbound Stock Connect. Other notable moves included Tencent Holdings Limited (Tencent, +0.39% today, -1.54% yesterday), Alibaba Group Holding Limited (Alibaba, +0.94% today, -1.6% yesterday), JD.com Inc. (JD.com, -1% today, -1.74% yesterday), Kuaishou Technology (Kuaishou, +0.52% today, -0.51% yesterday), NetEase Inc. (NetEase, +1.53% today, +0.37% yesterday), and Trip.com Group Limited (Trip.com, +0.33% today, -0.66% yesterday). There were numerous headlines about the food delivery rivalry among Meituan, Alibaba's Ele.me, and JD.com, though Meituan traded higher following its strong results.
Hong Kong remained resilient as the pre-Liberation Day resistance level continued to hold following the recent rally. Mainland China had a weak session, with banks outperforming, though trading volumes in the National Team's favored exchange-traded funds (ETFs) were light. Semiconductor stocks saw profit-taking after yesterday's strong performance, which had been driven by news that Nvidia Corporation would be selling lower-level chips to Chinese companies.
After the close in Mainland China, Beijing Chengtong CES Financial Investment Co. announced an investment of 600 million renminbi (RMB) into three ETFs focused on state-owned enterprises (SOEs) in the digital economy. The Lujiazui Forum, an economic policy-focused event, is scheduled to take place in Shanghai on June 18th and 19th. Meanwhile, Moody's reaffirmed China's sovereign credit rating at 'A1', with a negative outlook.
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