Update Equities: Spotlight on China
Geopolitics played an important part in stock market performance this week. Despite the short week due to US Presidents Day, US officials were very active in US-China trade negotiations and the situation in Ukraine. In Europe, the prospect of the need for increased government investments in defence spurred a rally in several related stocks. Industrial goods and services, to which most defence stocks belong, had a strong week.
Chinese equities also drew attention, due to the public meeting of President Xi Jinping with several top Chinese technology businessmen, including Alibaba’s Jack Ma. This meeting was seen as a sign that the Chinese government is willing to support its technology sector in case of a trade dispute with the US. Unsurprisingly, Alibaba has been one of the best performing big stocks in China since the improvement of its relationship with the local government.
Revenue growth in China also played a part in the quarterly earnings report of luxury goods company Hermes. Although growth in China remained below historical records, results were well received, as Hermes benefitted from strong demand for its top-line Birkin handbags at the end of 2024. Among luxury goods producers, Hermes is situated at the high-end of the sector. This makes the company more resilient to volatility in demand.
In the financial sector, HSBC published strong quarterly results and announced a share buyback program that could amount to up to USD 2 billion. Cost cutting is also on the table, as the Hong Kong and Shanghai Banking Corporation announced a global restructuring program. We continue to see positive developments in the financials sector, even despite the strong performance delivered by some banks in the previous months.
Schneider Electric reported quarterly sales and profits above expectations. The datacentre business, in particular, showed strong growth. Schneider’s CFO is confident about the impact on the business from the Chinese DeepSeek artificial-intelligence (AI) start-up, as lower cost AI-solutions are likely to speed up AI investments.