Pinduoduo Smashes Q3 Profit Estimates

Pinduoduo Q3 Earnings Overview

E-Commerce platform Pinduoduo beat estimates handily in both its top and bottom lines, demonstrating a strong ability to control expenses despite increasing spending on marketing its “Temu” US & Canada shopping platform. Management said they are “Dedicated to generating value through innovations, which forms the foundation of our high-quality development.” Pinduoduo has remarkably grown from a fringe platform to the world’s fifth largest E-Commerce platform in only five years since its IPO.

Adjusted, year-over-year (YoY)

• Revenue +94% to $9.5 billion versus estimate $7.7 billion
• Net Income $2.1 billion
• Net Margin 23%
• Earnings per Share $1.46 versus estimate $1.23

Meituan Q3 Earnings Overview

Local services and travel giant Meituan’s Q3 revenue was mostly in line with analyst estimates. The company’s strong margin growth in the hotel and travel segment reflects strong demand for domestic travel as well as the cost savings that Meituan can provide the consumer when it comes to travel. The company did see costs increase with added user subsidies. Meituan’s profit was slightly lower than estimates.

Adjusted, year-over-year (YoY)

• Revenue +22% to $10.6 billion versus estimate $10.6 billion
• Net Income $0.5 billion
• Net Margin 5%
• Earnings per Share $0.09 versus estimate $0.12

Key News

Asian equities were mixed but mostly higher overnight as Mainland China outperformed Hong Kong.

Overnight, the Hang Seng Tech index did not fall as much as US-listed China internet stocks did yesterday, which is leading to a rebound in US shares today along with a strong gain in Pinduoduo on earnings.

A rare event last night was net selling by Mainland investors in Hong Kong and net buying by foreign investors in Mainland China. Could this be the effect of the Biden-Xi meeting on investor sentiment? Time will tell.

The People’s Bank of China (PBOC), China’s central bank, once again pledged to encourage banks to lower real lending rates, leading to more monetary support for the economy in a bid to stave off deflation. However, the real estate sector was lower in both Hong Kong and Mainland China.

Xi embarked on his first trip to Shanghai for the first time since 2021. He has not visited the business hub since its famed lockdown in 2022. In a bid to further signify his government’s commitment to support the private sector, he will be visiting the Shanghai Futures Exchange and the headquarters of multiple companies including Semiconductor Manufacturing Co. (SMIC), according to rumors. However, the official list of companies on the president’s schedule has not been published.

The Hang Seng and Hang Seng Tech indexes both closed lower by -0.98% and -0.77%, respectively, on volume that increased +25% from yesterday. The top-performing sectors were Information Technology, which gained +1.53%, Health Care, which gained +1.03%, and Industrials, which gained +0.17%. Meanwhile, the worst-performing sectors were Consumer Discretionary, which fell -2.15%, Real Estate, which fell -1.53%, and Utilities, which fell -1.20%. Mainland investors sold a net -$389 million worth of Hong Kong-listed stocks and ETFs via Southbound Stock Connect.

Shanghai, Shenzhen, and the STAR Board all closed higher by +0.23%, +0.60%, and +0.45%, respectively, on volume that decreased -7% from yesterday. The top-performing sectors were Health Care, which gained +1.51%, Consumer Discretionary, which gained +1.45%, and Industrials, which gained +0.34%. Meanwhile, the worst-performing sectors were Real Estate, which fell -1.16%, Energy, which fell -0.38%, and Financials, which fell -0.38%. foreign investors bought a net $362 million worth of Mainland stocks via Northbound Stock Connect.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per EUR 7.84 versus 7.83 yesterday
• CNY per USD 7.15 versus 7.15 yesterday
• Yield on 1-Day Government Bond 1.56% versus 1.56% yesterday
• Yield on 10-Year Government Bond 2.69% versus 2.71% yesterday
• Yield on 10-Year China Development Bank Bond 2.77% versus 2.79% yesterday
• Copper Price +0.37% overnight
• Steel Price -0.48% overnight