Meituan (HKG: 3690) shares are down 12% in Hong Kong. This stems from the company’s forecasts about revenues in the immediate future. Well, OK, maybe food delivery isn’t going to be quite as popular as we all once thought. Which would be a company specific reason. But the whole Hong Kong market is down as well. There’s a reason for this - the first place we would see an approaching recession is in revenue predictions from consumer oriented firms. It’s important to grasp this. The official numbers, the government ones (this is not a comment upon purely Chinese statistics, this is true of all countries) are so so to pretty good at explaining what has happened. They’re terrible at what will happen and really not very good at all at what is happening. This is, of course, a good reason why detailed management of an economy is impossible, we just don’t gain the information flow necessary. But it also means that if we want to peer into the future then we’ve got to look elsewhere - to corporate results and predictions.
The specific news is: “China's Meituan (3690.HK) on Tuesday said it expects fourth-quarter revenue growth for its core food delivery business to slow versus the preceding quarter, as persistent consumer caution and warmer weather for the winter season hits orders. Deliveries will also likely decline versus the same period last year,” This quarter was pretty good, beating expectations: “Meituan shares tumbled the most in more than a year after the Chinese company warned that growth in its main meal delivery business would slow this quarter and spending on promotions rise.” It’s that next quarter that worries. “Meituan warned that growth in its main meal delivery business should slow this quarter and spending on promotions rise, as the company tries to sustain growth in an uneven Chinese economic recovery.” Uneven recovery might not be quite the right phrase. If consumer spending is falling then that’s not a recovery, that’s the prelude to a recession.
Umm, yeah: ““A cyclical recovery in China’s economy is still not imminent,” the Montreal-based research firm said in a report on Tuesday. “Gravity forces remain intense.”” Or as we’d put that in more normal language, maybe we’ve got a recession coming here?
Meituan share price from Google Finance
“This week’s setback has erased all the Hang Seng Index’s advance in November and more. The 80-member benchmark index has declined 0.9 per cent, adding to a 15 per cent slump in three preceding losing months, as China’s sluggish economic recovery eroded optimism among investors.” Could well be.
We’ve looked before at Meituan. “The problem for Meituan - or for opinions of Meituan, those opinions being what determines the Meituan share price - is that certain companies benefitted hugely from lockdown and the associated move to online sales. This would include food delivery companies of course. But then when lockdown ends we have seen - for many but not all - a fall back to pre-lockdown trends in the adoption of line shopping and food delivery.” It is true that the current forecasts are difficult given that resurgence last year. But as we’ve also said about Meituan: “Meituan (HK: 03690) shares have been hit by 6.5% over more general worries about the Chinese economy plus a dose of pessimism about competition. There's no corporation specific piece of news which really makes Meituan less attractive as a proposition, it's more general worries that seem to have coalesced around the stock.”
Well, is that what is happening here? Meituan being seen as a bellwether stock or problems specifically to do with Meituan’s market?
