China influencers vanish in lavish lifestyle purge, Beckham bends one for Alibaba
As China welcomes our bovine exports, there’s already plenty of beef (albeit of a different kind) in the Middle Kingdom. Here’s an insight into the action.
China’s economy might be a little slower than usual, but the news flow has been ramping up like crazy.
And we’re looking beyond the great news that China was easing its ban on Australian beef imports.
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Here’s a quick, handy snapshot of some of this week’s must-know market moving madness from the Middle Kingdom.
All as reported by state and indy media including Shanghai Daily, SCMP, Caixin, Bloomberg, Global Times The FT and friends, as well as Chinese social media platforms like Weibo, Douyin, and Xiaohongshu (Little Red Book).
Back in your shell, Sister Abalone
First up and of serious concern for any investors in the (largely) European luxury houses: Beijing’s launched a new campaign versus wealth-waving local influencers.
Douyin said in a statement on Monday that it would also start cracking down on fake “hot events” – for example videos of staged medical crises and domestic disputes designed to boost views.
“Douyin guides creators to record true, good lives,” the company said.
Already we’re seeing a bunch of famed social media accounts and posts “getting disappeared” from Chinese cyberspace.
That’s obviously going to be very bad news for the small army of mainly young Chinese influencers whose day-to-day involves getting heaps of kit from luxury brands and then posting themselves revelling in said lavish goods, purchases and their luxurious lifestyles and sharing it all on the array of social media platforms.
One of many major names targeted for ostentatious shows of wealth was popular influencer Bao Yu Jia Jie (Sister Abalone), who boasts 2 million followers on Dou Yin, regularly flaunts her elaborately decorated mansion and – in the words of one journalist – “was regularly seen dripping with diamond and pearl necklaces”.
Never a smart play in President Xi Jinping’s austere China of 2024.
The latest morality campaign follows the Chinese internet watchdog’s crackdown that kicked off last month and was aimed at curbing behaviour such as “deliberately showcasing a lavish lifestyle built on wealth”.
China’s Communist government has, under Xi, strangled the Western associated vulgarities of capitalism and the various freedoms of its social media celebrities and their roaming voices.
Given the already lowering valuations of the China-exposed luxury sector amid slowing demand, history suggests investors should brace for double digit stock falls if past episodes are anything to go by.
Although China’s “Clear & Bright” campaign in 2021 did not impact demand in a meaningful way, it did lead the sector to fall 12 per cent on average. This time however, the crackdown comes on the back of already sluggish Chinese demand.
In terms of exposure to the Chinese consumer, think:
- Swatch (~38 per cent of sales)
- Hermès (~34 per cent)
- Zegna (~33 per cent)
- Burberry (~32 per cent)
- LVMH F&LG (~31 per cent)
- Richemont (~28 per cent
- Kering (~26 per cent)
- Moncler (~25 per cent)
- Ferragamo (~23 per cent)
- Prada (~22 per cent)
In the uncertain context of these uncertain times, UBS retains a bias for the lux brands with “balanced growth across nationalities” and no over-reliance on the usually profligate Chinese consumer.
Three names UBS reckons fit the bill best: Hermes, Richemont and … Ferrari*.
(*Ed: Oh. Ferrari. Didn’t see that one coming.)
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Alibaba: Commercial panic? Time for a Becks
Alibaba Group’s mega online marketplace “AliExpress” has gone back to enlist English soccer star David Beckham as a global brand ambassador, the company announced Monday, as the Chinese e-commerce giant doubles down on efforts to boost sales overseas.
AliExpress said the one-year partnership was part of a campaign for the upcoming UEFA Euro 2024 soccer tournament.
Users of the online marketplace will get a chance to win discounts and other prizes, such as match tickets.
AliExpress is part of Alibaba International Digital Commerce Group, one of six units formed following the company’s major restructuring in 2023.
And that was a cracking segment last quarter – revenue out of the international retail-commerce biz jumped 60 per cent on last year to $US11.3 billion for the year ended March 31, with 36 per cent of that revenue growth via AliExpress.
But to remind everyone of the scale of China’s (underperforming) e-com sector – both incumbent giants – Alibaba and JD.com – were smashed by Pinduoduo’s (PDD) quarterly growth when the adolescent e-commerce monster reported on Wednesday.
The relative newbie successfully tapped domestic online shopping trends, including the clear local preference for bargain hunting in times of austerity.
China’a wobbly old economic recovery has seen PDD – owner of both upstart e-comm platforms Temu and Pinduoduo – drop a Q1 net income about 250 per cent better than last year to almost $US4 billion on sky-high revenue.
Funds or semi-working semiconductor sector
Meanwhile, China is pumping another 344 billion yuan ($47.5 billion) into a state-backed semiconductor industry investment fund to drive its chip industry development amid an escalating technology race with the United States.
State media reports that Phase #3 of China’s National Integrated Circuit Industry Investment Fund will be flooded with funding from 19 state-owned investors, led by the Ministry of Finance.
The fund will go in for in equity investment and asset management in the integrated circuit industry.
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Kind-of-real real estate sector support
Shanghai will reduce the minimum down payment ratio for first-home buyers to 20 per cent (versus 30 per cent before) and cut the ratio for second-home buyers to 30 per cent for suburban areas (versus 40 per cent before) and to 35 per cent for the rest of the city (versus 50 per cent before).
Shanghai will concomitantly slash its minimum mortgage rate for first-home purchase to LPR-45bps (versus LPR-10bps earlier).
The mega-city will also welcome back non-Shanghai residents to the fold by shortening the number of years of social insurance and income tax payments required before buyers become eligible to dive in.
Finally, Shanghai officials will also abolish home-purchase restrictions for divorced couples, and there’s a fair few of those – most of them doing pretty well to afford it.
This content first appeared on stockhead.com.au
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