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| HKECIC Weekly Market News |
| 19 May 2020 |
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| Market Snapshots |
| Asia and Australasia |
China: Retail sales fall 7.5% in April
Figures from the National Bureau of Statistics (NBS) showed that China's total retail sales of consumer goods fell 7.5% yr/yr to RMB 2.82 trillion in April, easing from a decline of 15.8% in the preceding month. By categories, sales declined for garments & footwear (-18.5%), jewelry (-12.1%), household appliances & audio-video equipment (-8.5%), amongst other things. On the contrary, sales rose for food products (+18.2%), beverage (+12.9%), communication equipment (+12.2%) and daily necessities (+8.3%). Separate data from the NBS showed that total industrial output grew 3.9% yr/yr in April, expanding for the first time this year. NBS said in a statement that the national economy is gradually returning back to normal with main economic indicators improving in April. However, given the continuous spread of the COVID-19 epidemic around the world, the stability and recovery of the national economy is still facing with multiple challenges. |
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| Europe |
Eurozone: Industrial production plunges in March
According to estimates from Eurostat, Eurozone’s seasonally adjusted industrial production fell sharply by 11.3% mth/mth in March, versus a 0.1% fall in February, as the COVID-19 containment measures were widely introduced by Member States. Decreases were registered in a majority of major economies, including Italy (-28.4%), France (-16.4%), Spain (-11.9%) and Germany (-11.2%). It is widely expected that output level will further decrease in April as national lockdowns had been put in place for the whole month in most Member States. Regarding the containment measures, Germany has announced to start relaxing its border control restrictions, and is pursuing to reopen its borders to France, Austria and Switzerland by 15 June.
UK: Economy contracts by 2.0% in Q1
According to the Office for National Statistics (ONS), UK GDP fell by 2.0% qtr/qtr in Q1 2020, compared to a zero growth in Q4 2019. This posts the largest quarterly contraction since the 2008 global financial crisis, reflecting the negative impacts of public health restrictions and social distancing to curb the spread of the COVID-19. In particular, export volumes declined by 10.8% qtr/qtr in Q1, while import volumes fell by 5.3%, putting UK’s trade balance in the deficit zone. Considering the single month of March where national lockdown was imposed, GDP showed a record plunge of 5.8%, which offers a broader picture at the direct impacts of the COVID-19 on the economy. Finance Minister Rishi Sunak said it is very likely that the UK is facing a significant recession at the moment and this year. |
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| North America |
US: Trump extends executive order on US telecom supply chain security for one year
US President Donald Trump has extended for one year an executive order declaring a national emergency which prohibited US companies from working with or using telecom equipment from firms that deemed to post national security risk until May 2021. The executive order, that Trump signed originally in May 2019, invoked the International Emergency Economic Powers Act which empowers the president to regulate commerce in response to a national emergency that threatens the US. While the order does not specify particular company names, it is generally believed that the move is aimed at Chinese technology giants including Huawei and ZTE Corporation. Separately, the Department of Commerce has decided to extend the temporary general license that allows certain transactions with Huawei and its 114 non-US affiliates on the Entity List for another 90 days to 13 August 2020. |
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J. C. Penney Company, Inc. (NYSE: JCP), a US-based department store chain, has filed for Chapter 11 bankruptcy protection. It becomes the latest brick-and-mortar retailer to fall victim to the COVID-19 outbreak. The company said that it had secured support from some of its creditors for a bankruptcy restructuring plan that would eliminate billions of dollars of debt. The department store chain, known for selling family apparel, cosmetics and jewelry at roughly 850 locations, once operated more than 1,600 locations that became fixtures in US malls. The company at one point employed nearly 200,000 people.
Stage Stores Inc., the parent company of discount retailers Peebles, Palais Royal, Bealls and Goody's, has filed for Chapter 11 bankruptcy protection in an attempt run a sale process for its businesses or assets and initiate an orderly wind-down of operations. All stores are temporarily closed and most employees were placed on furlough. Chief executive said in a statement that the increasingly challenging market environment was exacerbated by the COVID-19 pandemic.
The ALDO Group Inc., a Canada-based footwear and accessory retailer, has filed for creditor protection in Canada under pressure by the COVID-19 pandemic. The retailer said it will complete the restructuring in a timely fashion and planned to exit the process as soon as possible. Aldo’s online business would remain open throughout the process. CEO David Bensadoun said ALDO expects to carry on business while it develops and implements a comprehensive restructuring plan across the organization. The group has applied for similar protection in the US and Switzerland.
Johnson Electric Holdings Limited (SEHK: 179), a HK-listed manufacturer of motors, control systems and related components, announced its financial results for the year ended 31 March 2020. Total sales decreased 6% yr/yr to US$3,070 million, while gross profit dropped 11% to US$672 million. Meanwhile, the company recorded a net loss of US$494 million, compared to a net profit of US$281 million in the prior financial year. The company attributed the losses partly to the COVID-19 outbreak and persistent US-China trade tensions. The company said sales levels in Q1 of the current financial year will be substantially weaker than in the same period a year ago, adding that it is not possible to offer meaningful guidance on the near-term financial prospects for the business. |
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