China’s fragile retail recovery still rests on the rich
MAINLAND CHINA & HONG KONG
Chinese consumers are finally starting to spend again after the pandemic-induced slump, but the recovery is unbalanced and overly reliant on luxury goods, with poorer Chinese still cautious.
Consumption has started to catch up to the much stronger rebound in industrial output, with retail sales growing in August for the first time this year. Spending on luxury goods, cars, and electronics is leading the charge, rising faster than food, clothing, and other essentials.
While the supply side of China’s economy has shown resilience, a strong and broad rebound in spending is needed for a more meaningful economic recovery. Even though the virus is under control, income and job losses due to the pandemic have made poorer Chinese unwilling or unable to increase spending, keeping a lid on the rebound.
Luxury spending in China will grow 20-30% this year, according to a report from Boston Consulting Group, but much of that growth is going to come from consumers in the 50 largest and richest cities. People in the other 2,206 cities bought only a quarter of all luxury goods in April-July this year, and their spending was down 4% compared with 2019, according to the report.
The lopsided recovery can also be seen in the car market. Sales of luxury vehicles have recovered much quicker than regular cars and are now almost a fifth of all cars sold.
One luxury where spending has not rebounded is gambling in Macau, which is forecast to see an 81% drop in revenue this year, according to market analysts. Gaming in the city is traditionally a good indicator of discretionary spending in China, but that came to a crashing halt in February.
Travel is another sector where there is still a long way to go to recover from the damage caused by the pandemic. Real-time data from China’s 11 biggest cities shows that people are still somewhat wary about going out via public transport.
The week-long national holidays from 1 October will give an indication of whether consumers are becoming more willing and able to spend on discretionary items such tourism. State television reported that bookings were rising, but they are unlikely to reach the levels seen in October 2018 or 2019, when more than 1.5b trips were made. – Bloomberg News.
The Shanghai Composite Index climbed 0.17% to 3,279.71 and the Hang Seng Index closed 0.11% higher at 23,742.51 on Wednesday.
REST OF ASIA
India stocks fell for a fifth straight day on Wednesday (23 September), with the country’s benchmark suffering its longest string of losses in six months.
The S&P BSE Sensex dropped 0.2% to 37,668.42 in Mumbai, erasing an earlier gain of as much as 1%. The NSE Nifty 50 Index also lost 0.2%. A measure of telecommunication shares sank 7.4%, its biggest fall since March.
Bharti Airtel Ltd (BHARTI IN) weighed on the gauge, with the stock sinking 7.9% after industry leader Reliance Jio Infocomm Ltd unveiled a competitive new tariff plan. Reliance Industries Ltd (RIL IN), the parent of unlisted Jio Infocomm, added 0.9%.
Both the Sensex and Nifty are headed for their longest string of losses since 2 March. Until this week’s (ending 25 September) declines, the measures had climbed by about 50% from coronavirus-triggered losses later that month. Cases of the infection have since surged to the second highest in the world and continue to climb. – Bloomberg News.
Australia’s S&P/ASX 200 Index opened 1.37% lower at 5,842.70 on Thursday morning. It gained 2.42% to 5,923.90 the previous session.
South Korea’s Kospi Index fell 1.62% to 2,297.98 in early-Thursday trading. It remained little changed on Wednesday.
The Taiwan Stock Exchange Weighted Index closed 0.49% lower at 12,583.88.
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