Chinese Companies Face Setback as Economic Figures Disappoint

Several major Chinese companies, including Alibaba, PDD, and JD.com, experienced a decline in their stock prices on Wednesday. This downturn was a direct result of underwhelming economic data released by China, which dampened prospects for the year ahead.

China's gross domestic product (GDP) recorded a modest growth rate of 5.2% in the fourth quarter of 2023. Although this surpassed the Chinese government's target of approximately 5% growth, it still marked one of the lowest levels seen in decades.

Alibaba, a prominent Chinese internet company, witnessed a 3.2% drop in its American depositary receipts (ADR) during premarket trading. Likewise, ADRs for JD.com fell by 4.6%, and those for PDD, the parent company of Pinduoduo and Temu, were down by 4.1%.

Hong Kong's Hang Seng Index also experienced a slump, closing down by 3.7% on Wednesday and reaching its lowest level in nearly 15 months.

These developments may compel the Chinese government to take action in order to restore economic confidence. However, no such measures have been implemented thus far. Despite Chinese equities being currently undervalued—with Alibaba's ADRs having a trailing price-to-earnings multiple of 9.6—investors remain cautious due to regulatory crackdowns, tensions between the United States and China, and sluggish economic growth.

Julius Baer economist, Sophie Altermatt, stated in a research note on Wednesday that they anticipate the Chinese economy's growth momentum to stabilize at a subdued level throughout 2024, with annual growth projected to slow to 4.4% that year.