Growth Dragons Weekly: China Stocks Down in First Week; BYD Overtakes Tesla; Mixue Files for IPO
Here’s what happened in Growth Dragons this week:
Bumpy Start for China Stocks and Economy in 2024
ASML Halts China Orders Before Ban Officially Takes Effect
Baidu Says No to Joyy
BYD Knocks Tesla Off Its Throne
Mixue and Goodme Apply for IPO
#1 Bumpy Start for China Stocks and Economy in 2024
China stocks did not have a hopeful start as the iShares MSCI China ETF fell by 1.31% in the first week of trading in 2024. Of course, it is still early in the year, and one might argue that the S&P 500 ETF also didn’t start well, experiencing a 0.9% decline. The key difference is that the S&P 500 was up by 26% last year, while China equities have generally been down for the last three years. This context makes the hope for a rebound in Chinese stocks even more pressing.
The Caixin/S&P Global manufacturing PMI increased to 50.8 at the end of 2023, up from 50.7 in November, marking the fastest expansion in seven months and surpassing analysts' forecasts of 50.4.
In contrast, December’s official manufacturing Purchasing Managers’ Index (PMI) fell to 49 from November’s 49.4, according to data from the National Bureau of Statistics.
The discrepancy in the PMI readings stems from the National Bureau of Statistics surveying larger companies and state-owned enterprises, while Caixin’s survey has greater representation from smaller, privately-owned companies.
Considering the entirety of 2023, the PMI rose by 0.8, which is impressive given the macroeconomic and internal economic headwinds. China's post-COVID recovery is slower than expected, as domestic demand will take time to recover, but it is underway.
We believe that China will recover; it remains a crucial centerpiece of the global supply chain, but expectations need to be realistic. It is not the year to expect a parabolic reversal to cover the losses of the last three years. A modest positive return for the MSCI China Index in 2024 would be a good sign.