Multinationals are increasingly concerned about the state of China’s economy: China has not seen the economic turnaround post-Covid that many expected, with weak demand and sluggish growth pushing down consumer confidence. Amid the economic slowing, multinational companies are seeing sales decline as consumers cut back on spending and turn toward domestic brands — a trend executives believe will continue for the foreseeable future.

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Sales are falling: According to advertising giant WPP, sales in the Chinese market have dropped nearly one-quarter in the last three months, reflecting the contraction of consumer appetite amid a sluggish economy. Foreign carmakers in particular have seen significant declines in sales, as consumer preference shifts toward EVs and away from the luxury auto market. Domestic competition is also playing a factor, as more and more Chinese brands outcompete multinationals in the Chinese market.

Distressed real estate markets are partly to blame: The heavily indebted Chinese real estate sector has seen growth slow since late 2021. With much of households’ wealth tied up in real estate, the downturn in the market has had a significant impact on consumer spending. “Uncertainty surrounding disposable income prospects, combined with further shrinkage of household wealth due to falling housing prices has led to a reduction in non-essential expenditure or a shift towards value-for-money product,” impacting not just restaurants but also other discretionary categories like “clothing, cosmetics, and gold and silver jewelry,” Fitch Ratings analysts say in a recent research note.

Still, a slow turnaround isn’t enough of a reason to turn one’s back on what is (arguably) the largest economy in the world, executives point out. “Even at current growth rates China still accounts for almost one-third of the world’s annual growth,” CEO of Yum China Joey Wat tells the Financial Times. And while lower sales hurt companies’ bottom lines in the present period, executives believe that the country’s “long-term fundamentals are still in place,” Anheuser-Busch InBev CEO Michel Doukeris tells the salmon-colored paper. Yet, despite a generally positive outlook, according to Wat “business is tough right now.”

MARKETS THIS MORNING-

Asian markets are mostly in the green this morning after one particularly volatile week that saw major sell-offs then sharp rebounds. The Kospi is looking at gains of 0.9%, while Hong Kong’s Hang Seng is down 0.5% at dispatch time. The Nikkei is closed today as the Japanese observe Mountain Day.

MEANWHILE- Futures for US indexes are down this morning as investors await inflation data due on Wednesday.

EGX30

29,533

+2.7% (YTD: +18.6%)

USD (CBE)

Buy 49.17

Sell 49.30

USD (CIB)

Buy 49.18

Sell 49.28

Interest rates (CBE)

27.25% deposit

28.25% lending

Tadawul

11,772

+0.9% (YTD: -1.6%)

ADX

9,306

+0.6% (YTD: -2.8%)

DFM

4,195

0.0% (YTD: +3.3%)

S&P 500

5,344

+0.5% (YTD: +12.0%)

FTSE 100

8,168

+0.3% (YTD: +5.6%)

Euro Stoxx 50

4,675

+0.1% (YTD: +3.4%)

Brent crude

USD 79.66

+0.6%

Natural gas (Nymex)

USD 2.14

+0.8%

Gold

USD 2,473.40

+0.4%

BTC

USD 58,573

-4.1% (YTD: +38.6%)

THE CLOSING BELL-

The EGX30 rose 2.7% at yesterday’s close on turnover of EGP 4.0 bn (12.8% above the 90-day average). Local investors were net buyers. The index is up 18.6% YTD.

In the green: Elsewedy Electric (+11.0%), Alexandria Containers and Cargo Handling (+7.1%), and Eastern Company (+6.1%).

In the red: Edita (-0.7%).

CORPORATE ACTIONS-

Raya Holding distributed some 3.97 mn shares — worth EGP 8.9 mn — among its employees under its employee incentive and reward program, according to an EGX bulletin.

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