China sees $157B rout in consumer stocks amid price wars

From electric vehicles to fast food, companies are engaging in a battle of promotions aimed at luring customers who are spooked by dim job prospects and have seen a persistent property slump hurt wealth creation. Consumer prices fell for a third-straight month in December, the longest streak since 2009, deepening concerns about companies’ profits and share prices.

“That’s all symbolic of a very weak consumption environment that includes lack of consumer confidence and weak income growth,” said Xin-Yao Ng, an investment director for Asian equities at abrdn. “We are cautious on 4Q earnings across most sectors, and would assume that continues in 1Q unless the government starts doing something massive to support the economy.”

Gauges of consumer stocks have been the worst performers on the MSCI China Index since the end of September, after the real estate measure. The aggregate market value of companies included in the two consumer indexes has fallen by about $157 billion since. And the biggest drags on the MSCI benchmark in this span include e-commerce giant Alibaba Group Holding Ltd., restaurant operator Yum China Holdings Inc. and EV maker BYD Co. — which have all been offering big discounts.

The world’s second-largest stock market has started 2024 on a dismal note, with the MSCI China gauge already down more than 4% so far this year. It capped a third straight annual decline in 2023.

“The bigger picture is that the weak demand is leading to a deflationary environment, which particularly bodes ill for businesses that cannot achieve higher volumes with lower prices,” said Daisy Li, a fund manager at EFG Asset Management HK Ltd.

Wider Discounts

The EV industry has been among the worst hit by intense competition as growth slows, with Chinese…