Dressing Down

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What’s going on?

Pinduoduo’s salad days might finally be over: the Chinese fruit and veg ecommerce platform reported worse-than-expected results on Friday.

What does this mean?

Pinduoduo was full of beans when China was in a pandemic-related pickle, but its performance went a little pear-shaped last quarter. The country’s shoppers could, after all, finally go bananas in bricks and mortar stores, thanks to both a rise in coronavirus vaccinations and drop-off in restrictions. Toss in supply disruptions that might’ve made it tricky for Pinduoduo to cherry-pick the stock it needed, and the last few months couldn’t beat forecasts: the platform’s revenue grew 51% compared to the same time last year – a long way short of the 87% investors were expecting.

Why should I care?

For markets: Is Pinduoduo going cheap?

Pinduoduo’s share price initially fell 12%, but the update itself wasn’t entirely to blame for the sour grapes: investors have been increasingly wary of China’s unpredictable crackdowns on tech companies, with Pinduoduo’s stock having fallen more than 40% this year even before these results. But at least the tech giants are peas in a pod: Alibaba and Tencent have seen their stocks collapse 43% and 20% respectively in the same period. Some analysts reckon this makes now a plum time to buy Chinese stocks, but only time will tell if they’re just dangling a carrot in front of investors’ noses…

The bigger picture: A tale of two countries.

Then again, Pinduoduo is small potatoes as far as China’s concerned: the only thing it gives a fig about right now is reversing the slowdown in its economic growth. That’s got some economists wondering if the country might start slashing interest rates, which would lower the cost of borrowing and, in turn, encourage companies and individuals alike to spend their money. How do you like them apples, America: the US Federal Reserve has been talking about raising rates in an effort to curb rocketing prices.

Originally Posted on November 26, 2021 – Dressing Down

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