Baidu & Kuaishou Earnings Highlight Cost Efficiency

Kuaishou Earnings Overview

Kuaishou reported earnings that came in below analyst estimates, posting a third-quarter loss of RMB -3 billion. Some analysts have lowered their revenue and user growth estimates because of this release, as COVID and other macroeconomic headwinds have weighed on the company’s growth lately. Nonetheless, Kuaishou cut costs and improved its margin quarter-over-quarter. Also, live streaming continued to grow steadily, meaning that the company should be able to capture a great deal more advertising revenue on pent-up demand as Zero COVID is relaxed.

• Revenue +12.9% year-over-year to RMB 23.13 billion
• Net Margin -12.8% versus -14.3% in Q2
• Net Income RMB -2.96 billion
• Earnings per Share RMB -0.70

BaiduBIDU
Earnings Overview

Considering all the macroeconomic headwinds out there, Baidu’s Q3 results were strong. The company managed a clean beat on the margin and bottom line driven by cost optimization. Key points for the quarter were the company’s increasing efforts at selling more video advertising and increasing its penetration of China’s E-Commerce market, much to the chagrin of JD and Alibaba, among others.

• Revenue +1.9% year-over-year to RMB 32.54 billion
• Net Margin 13.6% versus 12.3% in Q2
• Net Income RMB 4.42 billion
• Earnings per Share RMB 12.67

Key News

Asian equities were mixed overnight as internet stocks gained some ground from yesterday on mixed Q3 earnings results. Hong Kong’s massive short turnover of late has cooled down. Overnight, short turnover decreased by over 30%.

The South China Morning Post had an interesting editorial remarking on the fact that Xi Jinping is seen at the G-20 in close quarters with other world leaders without wearing a mask. Meanwhile, workers protested COVID controls at Foxconn’s plant in Zhengzhou. Zero COVID easing is certainly in the works but will be gradual.

Yesterday’s news about a potential $1 billion fine being levied on Ant Group by the People’s Bank of China (PBOC), China’s central bank, was according to “people familiar with the matter” and has not been confirmed yet. Nonetheless, it is likely to happen and represents the completion of the company’s regulatory review, which has been the longest review period in the internet space. The company may IPO, which would be a catalyst for Alibaba. Meanwhile, we know that the company’s application to become a financial holding company is sitting in the Hangzhou branch of the PBOC. Hopefully, this fine will serve as a massive application fee, allowing the application to be approved.

The Hang Seng and Hang Seng Tech indexes gained 0.57% and 1.13%, respectively, on volume that decreased -24% from yesterday. Growth factors outpaced value factors on the internet rebound. Mainland investors sold a net -$26 million worth of Hong Kong stocks overnight.

Shanghai, Shenzhen, and the STAR Board diverged to close 0.26%, -0.34%, and -0.08%, respectively, on volume that decreased -6% from yesterday. Foreign investors purchased a net $218 million worth of Mainland stocks overnight.

China Last Night will take a break tomorrow for the Thanksgiving holiday in the US. Happy turkey day to those that celebrate!

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.17 versus 7.14 yesterday
• CNY per EUR 7.40 versus 7.34 yesterday
• Yield on 1-Day Government Bond 1.10% versus 1.10% yesterday
• Yield on 10-Year Government Bond 2.80% versus 2.83% yesterday
• Yield on 10-Year China Development Bank Bond 2.90% versus 2.94% yesterday
• Copper Price -0.35% overnight