Conference Season 

New Export Leader  

Despite the Hang Seng Index down -5% year to date and -22.9% over the last year, the Chinese auto industry has been making strides. China has recently overcome Japan to become the world’s biggest car exporter, shaking up the auto industry. While it has been a known leader in the electric vehicle space, traditional gas-powered cars were the main drivers to oust Japan as the number one exporter.¹ The China Passenger Car Association (CPCA) said on January 9 that exports of cars jumped 62% to a record 3.83 million vehicles, surpassing Japanese exports of 3.5 million vehicles.²  

China’s total exports were estimated to hit 5.26 million units for the whole of last year, valued at $102 billion.³ It had success with exporting gas-powered cars to markets such as Russia and Mexico, where demand remains strong. The manufacturing playbook has been successful in China for years, regardless of the product.  

This remains to be true, with non-Chinese car manufacturers looking to expand in these areas. Volkswagen (VWAGY) announced in November 2023 that it will develop a new platform for entry level electric vehicles in China, allowing the company to source more local components at a lower cost. Even American brand Ford (F) has made comments similar to Volkswagen. Jim Farley, CEO of Ford, mentioned, “Ford will use Chinese operations as ‘export hubs’ to build affordable electric vehicles and commercial vehicles for markets including South America, Australia and Mexico.”⁴  

In December 2023, China’s top leaders reiterated that they will step up policy adjustments to support an economic recovery in 2024. Investors have been patiently waiting for stimulus to come from the Chinese government in one form or another for the duration of 2023. The state media said they plan to implement structural tax and fee cuts and are planning a new round of fiscal and tax reforms.⁵ 

Chart 1: China vs. Japan – Vehicles Exported (In Millions) ⁶ 

Conference Highlights  

Conference season is officially upon us, as the ICR conference and the J.P. Morgan (JPM) healthcare conferences were underway this week. There was a flurry of retailers providing guidance earlier in the week, led by Lululemon (LULU), Abercrombie & Fitch (ANF), American Eagle (AEO), Urban Outfitters (URBN) and Crocs (CROX).  

Lululemon led the pack with raising its Q4 2023 sales, gross margin and earnings per share guidance based on momentum it saw in the holiday shopping period, as well as ongoing optimism from its China piece of the business and inventory flexibility. Abercrombie & Fitch (ANF) pulled a similar move, raising both its Q4 2023 sales and operating margin guidance, surprising investors to the upside with improved guidance targets. For all the golf fans — there was a timely announcement from Tiger Woods, as he announced that he is ending his partnership with Nike after 27 years. This move leaves us all questioning what Tiger Woods will do next — eyes are on Taylor Made, Malbon Golf, Skechers and smaller companies like Greyson Clothier.⁷  

The J.P Morgan healthcare conference has also taken headlines this week, as analysts and managers returned to San Francisco for the event. On a side-note, last year’s event generated an estimated $86 million in economic activity and $8 million in tax revenue for the city.⁸ The first day of the event was driven by M&A, as Johnson & Johnson (JNJ) announced that it would purchase Ambrax Biopharma — a company that specializes in targeted chemotherapy treatments — for $2 billion. Merck (MRK) also announced that it will acquire Harpoon Therapeutics for $680 million, receiving its pipeline of immune-based cancer drugs. Boston scientific (BSX) also reported that it is going to buy Axonics Inc (AXNX) for $3.7 billion, giving it access to devices used to improve bladder function.  

As the rest of the week unfolds, we are looking forward to hearing more news from both the ICR and J.P. Morgan conferences, as well as comments from the Federal Reserve and the important CPI report. On Friday, we will see several bank earnings reports, kicking off the 4Q results. I will be on CNBC on Friday morning to discuss the results.   

Stephanie Link: CNBC TV Schedule

Sources

1. WSJ. As of January 9, 2024.
2. Reuters. As of January 9, 2024.
3. WSJ. As of January 9, 2024.
4. Carscoops. As of January 10, 2024. [1] Source: Reuters. As of December 12, 2023.
5. WSJ. As of January 9, 2024.
6. Footwear News. As of January 8, 2024.
7. San Francisco Chronicle. As of January 8, 2024.

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