A double bill of pleasing financial results for two of China’s largest conglomerates has offered a spark of hope for the economically stressed Asian superpower.
Tencent Holdings (HKG:0700, OTC:TCEHY), known for its popular social media app WeChat, reported a 10% increase in revenue, reaching 154.6 billion yuan ($21.4 billion) for the September quarter.
This growth was primarily driven by a surge in video advertising on WeChat, highlighting the continued consumer engagement in social media and gaming.
However, the company's net income saw a 9% decline, reflecting increased spending on content and a comparison to a previous quarter boosted by a one-off gain.
Meanwhile JD.com Inc (NASDAQ:JD), a major player in the e-commerce sector, also reported a stronger-than-expected performance with a 1.7% rise in quarterly revenue, amounting to 247.7 billion yuan ($34.2 billion).
This growth comes despite the intense competition and heavy promotional spending, indicating a robust online transaction environment.
Bloomberg analysts noted that “the results may help assuage concerns that the world’s largest internet market has lost steam after years of regulatory and economic turmoil".
Yet, the reality of a muted Chinese consumption landscape cannot be swept under the rug.
The property market remains in a state of crisis and rising unemployment, declining population growth and the long-tail effects of authoritarian COVID-19 pandemic lockdowns are significant factors contributing to the cautious outlook of the world’s second-largest economy.
Furthermore, the performance of Tencent and JD.com, while seemingly impressive, is still a far cry from the double-digit growth seen in previous years.
As Union Bancaire Privee analyst Vey-Sern Ling commented: “The positive stock response also underscores how low expectations have sunk, a factor to bear in mind across the remainder of China tech reports the next few days.”
The recent earnings beats by Tencent and JD.com offer a glimmer of hope, but they do not fully mitigate the global concerns surrounding China's economic downturn.
Companies like Apple, Volkswagen, and Burberry in the UK (not to mention Paris’ litany of luxury large caps), which rely heavily on China's consumer market, are facing ongoing challenges due to reduced spending in China.
China's decreased demand for goods and services is impacting the big raw materials exporters like Australia, Brazil, and some African countries.