Alibaba and Ping An Insurance smash earnings expectation | CMC Markets Daily Commentary
Despite broad economic slowdown and lower retail sales growth, China’s dominant e-commerce player, Alibaba delivered a much better-than-expected 2Q earnings with 42% year-on-year growth in revenue and their net profit more than doubled from a year ago. Adjusted earnings per share (EPS) came in at an estimated 12.55 yuan versus 10.3 yuan.
Chinese online sales accelerated in the three months ending June, as the demographic shift to e-commerce continued to drive growth in the sector. Alibaba’s 42% revenue growth is close to twice the rate of China’s online retail industry as the ‘winner takes all’ theory accelerated Alibaba’s active consumer growth and average spend amount.
Alibaba’s smaller rival JD.COM also beat market expectations earlier this month with 22.8% year-on-year growth in revenue.
With the US-China trade war having direct impact on manufacturing and the export-oriented sector, domestic players with a focus on consumer markets are more resilient against global headwinds. Its share price rose 3% last night, while the benchmark index struggled to hold ground.
Ping An Insurance (2318 HK), one of China’s largest insurance and financial groups, also smashed analyst forecast with 68.1% growth in 1H net profit on strong retail results. For the six months ending June, its net profit attributable to shareholders hit 97.68 billion yuan, and individual clients increased by 9.5% year-on-year.
Strong earnings from Alibaba and Ping An Insurance will likely boost sentiment in Hong Kong and mainland shares today, defying fears of an immediate recession. Resilient consumer markets and healthy sales growth from the retail space suggest there’s a strong cushion against global headwinds, while it also implies less fiscal and monetary stimulus.
Singapore’s Non-Oil Domestic Export (NODX) slumped 11.2% in July compared to last year, dragged by a whopping 24.2% drop in electronics shipments. This decline, however, has narrowed from the previous month’s reading of 17.3% and is also better than the market’s forecast. The Ministry of Trade and Industry has slashed Singapore’s full year economic growth to 0-1% this week, a revising down from a previous projection of 1.5-2.5%.
US retail sales growth picked up by 0.7% month-on-month, while industrial production declined 0.2% month-on-month in July. Unemployment claims came in within expectations at 220k. Mixed readings suggest strong consumer market is underpinning weakness in the manufacturing and mining sectors against the backdrop of trade war and disruption in supply chains.
Singapore NODX July 19
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