Earnings for China’s tech giants will shed light on how the country’s consumers fared in a fragile economy, supplemented by a more immediate indicator as the Singles’ Day shopping extravaganza wrapped up earlier last weekend.
China slid back into deflation in October — consumer prices fell 0.2% after hovering near zero for two months — highlighting the country’s struggle to shore up growth through domestic consumption. That’s despite economic growth of 4.9% year-on-year in the third quarter.
That sets the tone for reports from Alibaba Group Holding Ltd., JD.com Inc. and Tencent Holdings Ltd. The big test for them was Singles’ Day on Saturday, the world’s most significant shopping festival. Alibaba and JD.com reported sales increases for the event this year, although neither provided figures for the second consecutive year in a row.
Cost hikes from steeper Singles’ Day perks this year have likely hurt both firms’ margins despite higher gross merchandise value as compared to last year, said Bloomberg Intelligence analysts Catherine Lim and Trini Tan. These hikes could persist if business and consumer sentiment stays lackluster in the next 13 months, they added.
Over in Japan, major lenders Mizuho Financial Group Inc, Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. also announce results. That’s right on the heels of a rout in bank stock this week as bond yields eased and investors digested the implications of the Bank of Japan’s recent policy tweaks. Federal Reserve Chair Jerome Powell said the US won’t hesitate to tighten policy further if needed to contain inflation, which may put more pressure on Japanese markets.
Highlights to look out for:
Monday: Mizuho Financial Group’s (8411 JP) net income probably fell 22%, according to consensus estimates. Its main banking unit is set to follow competitors on raising deposit rates, according to a report in the Asahi newspaper. Mizuho plans to invest an additional $576 million to lift its stake in Rakuten Securities to boost its retail business, while plans for an initial public offering of the unit have been shelved for now.
- Grasim Industries’ (GRASIM IN) second-quarter profit is expected to fall 25% amid weakness in its chemicals business and soft pricing for viscose staple fabrics. It may provide more details on the launch of its paints business in the March quarter, where it faces stiff competition from Asian Paints and Berger Paints India.
Tuesday: Mitsubishi UFJ’s (8306 JP) net income probably more than doubled off a weak quarter a year earlier, helped by higher interest rates globally, along with the BOJ’s moves to allow domestic yields to move further upward. MUFG was the first to move on domestic deposit interest, raising the return on 10-year deposits to 0.2% from 0.002% starting Nov. 6. SMFG (8316 JP), which is expected to report a 13% drop in profit, will follow suit on deposits, also raising its 10-year rate to 0.2%, according to the Asahi newspaper report. The BOJ policy decision may “lead to a further rise in long-term yen interest rates, which is normally a positive for valuations of banking stocks,” Nomura’s Ken Takamiya wrote in a note.
Wednesday: Tencent’s (700 HK) third-quarter performance was probably helped by domestic games revenue growth picking up, fueling a 24% jump in operating profit from an already high base, according to Morgan Stanley. Citi also forecasts 21% growth in advertising revenue. Estimates show online advertising revenue increased 22%, while games revenue climbed 8.8%.
- JD.com’s (JD US) third-quarter revenue is expected to have risen 1.3%, according to consensus. A weaker recovery in the domestic economy and the lingering effects of a restructuring started last year are weighing on the Chinese company’s revenue outlook, HSBC said. BI reckons JD’s vast and varied logistics network will continue attracting international and domestic brands seeking to strengthen their positions in China.
Thursday: Alibaba (BABA US) could see its quarterly net income more than triple from last year, estimates show. It remains on track to emerge as one of China’s long-term AI winners, following Alibaba Cloud’s recent launch of an enhanced version of its generic AI large language model Tongyi Qianwen 2.0, BI said. Citi estimates their overall gross merchandise value for Singles’ Day this year likely grew by low single digits of 1% to 3%, as consumers have more options across different platforms amid more selective spending behavior.
- NetEase’s (NTES US) revenue grew 12% in the quarter, estimates show, as its mobile gaming business was buoyed by the release of Justice and contributions from games such as Dunk City Dynasty and Racing Master. Its operating margin should also expand due to a lower contribution from its low-margin licensed titles, according to Nomura analyst Jialong Shi.
- Lenovo (992 HK) is expected to stem a decline in revenue as the global PC industry picks up and on shipments of its AI servers. The company is among firms impacted by US curbs on chip exports, though analysts said the PC industry recovery will more than make up for it.
--With assistance from Ryotaro Nakamaru and Shwetha Sunil.
(Updates with this year’s Singles’ Day performance)
