Finimize - 🇨🇳 China lands with a bump

What’s going on here?

China's stock market started strong on Tuesday after the Golden Week break, but the post-holiday blues soon set in.

What does this mean?

Investors initially celebrated a market rush, hoping for fresh government measures to bolster the economy. The CSI 300, one of China’s key stock market indexes, was up 11% early in the day. But that enthusiasm disappeared after Chinese officials insisted that the country’s economic growth target (of “around 5%” this year) is achievable – and didn’t stump up more cash support. That disappointed investors, who – among other things – were looking for fresh cash injections to support the country’s property sector. And they turned their heels on Chinese stocks: the CSI 300 ended “only” up 6%, while stocks in Hong Kong fell 9%.

Why should I care?

For markets: Investors flew too close to the sun.

Some investors were holding out for an extra $500 billion of economic support to be unleashed in China’s Tuesday update. So they were disappointed by just an acceleration of already-planned spending. And that explains the selloff: investors were already looking to the future, figuring out how much that extra money would bolster the Chinese economy and what it’d be worth to stock prices today. And they concluded that without the added cash, those stocks, simply put, aren’t worth as much.

The bigger picture: The who’s who of who’s hit.

It wasn’t just Chinese and Hong Kong-based stocks that bore the brunt of investors on Tuesday. Shares of mining giants Rio Tinto and BHP and luxury retail behemoths LVMH and Gucci-owner Kering dropped between 4% and 5%. Investors had gotten ahead of themselves, thinking a boosted Chinese economy would mean more demand for industrial metals like iron ore and copper mined by Rio and BHP, and more consumer demand for fancy wares sold by the French fashionistas.

What’s going on here?

On Tuesday, drinks and snacks magnate PepsiCo announced third-quarter results that left a bad taste in investors’ mouths.

What does this mean?

Pepsi’s third-quarter revenue was 2% short of analyst forecasts. Partly to blame were the effects of earlier product recalls, which probably put customers off unaffected but related products as well as causing operational disruptions for Pepsi. Zooming into the figures, it’s worth noting that in the quarter and the year overall, Pepsi has been hiking product prices (both thanks to and causing inflation). But it sold fewer products as a result. Those price hikes have done their bit in one respect though: Pepsi’s third-quarter profit was in line with expectations.

Why should I care?

For you personally: Your preferences are striking back.

One reason to keep an eye on what consumer staples companies like Pepsi are doing is to get clues about how much more you’re likely to pay for Pepsi Max or Lay’s in the grocery store. Pepsi’s effectively hiked product prices by around about 4% on average, in US dollars, this year. That means, since your grocery store’s paying more, you’ll pay more too – otherwise it’d earn less. But data shows you aren’t necessarily resting on your laurels: you’re choosing cheaper alternatives from stores’ own brands, which’ll put pressure on the likes of Pepsi to get more competitive on price again. And heck, with wonderdrug Ozempic use reportedly so widespread, you might be turned off snacks and sodas whatever they cost.