Daily Brief: China's Smiling Through The Pain

Daily Brief: China's Smiling Through The Pain

over 1 year ago3 mins

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Data out on Monday showed that the Chinese economy staged a mixed recovery last quarter.

What does this mean?

China’s probably not sure whether it should be celebrating or grieving right now. See, the country’s quarterly report partly pleased optimists: the economy grew 3.9% last quarter versus the same time the year before – higher than economists were expecting and a rebound from near-stagnant growth just one quarter earlier. After all, supply chains were freed up as lockdowns in ports became less frequent, which helped industrial production grow 6.3% in September – and greater investment in things like machinery and infrastructure didn’t hurt either. But there was plenty for the pessimists too: Covid restrictions hit retail sales, while the teetering global economy dented export growth last month. That’s not to mention the worrying facts that the real estate sector kept shrinking last quarter, and unemployment unexpectedly rose. Despite the positive headline number, then, China’s economy still has issues in spades.

China GDP
Source: Bloomberg

Why should I care?

For markets: Covid’s the captain now.

Covid’s still calling the shots in China, with the country’s response to the pandemic dictating many elements of the Chinese economy. And given that President Xi has secured a third term as head of the ruling Communist Party – while filling key posts with loyal allies – the country’s zero-Covid approach seems unlikely to change anytime soon. No surprise, then, that the CSI 300, a key stock market index, fell 3% on Monday.

CSI 300
Source: Google Finance

The bigger picture: No oil on troubled waters.

China’s the world’s biggest importer of crude oil, so the prospect of ongoing economy-bashing government policies doesn’t bode well for the price of the slippery elixir. Even a surge in oil imports into the country, to the highest level since May, wasn’t enough to balance out the pessimism: Brent crude – a key international oil benchmark – fell 2% on Monday morning when the data hit the press.

Keep reading for our next story...

Hyundai Has An Electronic Tonic For A Brighter Future

Hyundai image

Hyundai reported worse-than-expected third-quarter results on Monday, but the South Korean carmaker said investors should stay plugged in for its electric future.

What does this mean?

Despite Hyundai’s disappointing third-quarter results, the carmaker was adamant that it’s still on track to make record-breaking profit this year overall, and said its renewed focus on EVs and luxury SUVs will, ahem, fuel a bigger and better future. Looks like Hyundai needs to practice the art of persuasion: less-than-convinced investors still sent the carmaker’s shares lower, anxious about current supply chain disruptions and the rising costs of materials. They might also be worried about the lasting effects of Hyundai’s massive engine recall from over five years ago: after all, the carmaker set aside a whopping 2.9 trillion won ($2 billion) in related provisions last quarter.

Hyundai profit
Source: Reuters

Why should I care?

Zooming in: The math ain’t mathin’.

Hyundai told investors this year that it believes it can sell nearly two million EVs worldwide by 2030, roughly 7% of the total market. Thing is, Hyundai only sold 50,000 electric cars last quarter, and while it does hope to sell 300,000 next year, it’ll need to supercharge those sales by 30% a year from then on if it wants to fulfill those electric dreams. Investors, all too aware of the market’s current challenges, have their doubts.

Zooming out: Sorry, Elon.

Hyundai predicts there will be 27 million EVs sold globally in 2030. And given that Forbes pinned Tesla’s market share at 14% earlier this year, the OG electric carmaker would account for around four million of those EVs if that share held steady. Those predictions, though, mean Tesla would only notch around 14% growth in car sales over the next eight years, which seems at odds with the firm’s goal to increase production by 50% a year over a few years. So either that aim is too ambitious, or the company’s set for an unwelcome slump after just a few years.

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