A singular Singles' Day

Thought of the day

by Chief Investment Office 11 Nov 2019

Singles’ Day, the world’s largest one-day online shopping event, is setting records again this year. The 24-hour mass sales event, first popularized by Alibaba, China’s largest e-commerce company, takes place each 11 November, and is larger than the US Black Friday and Cyber Monday retail events combined.

With the US-China trade dispute dominating news headlines this year, the event is in even sharper focus than usual as investors look for signs of whether the trade-induced slowdown in investment and growth in China and elsewhere is spreading to the rest of the economy.

  • Chinese consumption appears to be holding up… With several hours of the round-the-clock event remaining, gross merchandise value, which shows sales across Alibaba’s different shopping platforms, surpassed last year’s CNY 213.5bn (USD 30.5bn) record. While this could partly reflect demand switching from other channels, activity data suggested that consumers have also been holding up. In September, retail sales growth improved to 7.8% y-o-y from 7.5% in August.
  • …but global manufacturing continues to feel the strain. German data released last week revealed that industrial production shrank by 1.1% in 3Q, the fifth consecutive quarter of contraction. Construction output was stable, but manufacturing production declined across a broad range of sectors, including chemicals, metal products, electrical equipment, machinery and autos.
  • With the near-term outlook still uncertain, longer-term themes present opportunity. Greenpeace and other non-government organizations used the Singles Day event to highlight the issue of waste created by the e-commerce sector, in a report estimating that packaging material used by China’s e-commerce and express delivery sectors is likely to quadruple from 9.4m tonnes last year to 41.3m tonnes by 2025. Chinese regulators have started to address the issue: last month they published new draft packaging standards requiring courier companies to use approved recyclable materials. Current low rates of waste treatment in emerging markets offer big catch-up potential that could lead to rapid growth rates in the waste management and recycling sectors. In general, tighter regulation and an emphasis on "greening" the waste sector (according to the "4Rs" – recover, recycle, reuse and reduce) should result in greater capital expenditures that benefit a broad range of companies.

Against this backdrop, over a tactical investment horizon we continue to focus on earning yield rather than looking for much higher equity prices. We prefer USD-denominated sovereign bonds, and in our FX strategy we overweight select high-yielding emerging market currencies versus a set of lower-yielding ones. To invest over a longer horizon read our Long Term Investment themes, E-commerce and Waste management and recycling. The latter, directly and indirectly, supports more than half of the 17 UN Sustainable Development Goals (SDGs).

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