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Tag: China

  • Dynafit China appoints retail partner

    Dynafit China appoints retail partner

    Ski, mountaineering and backcountry gear manufacturer Dynafit has announced Blue Ice Adventure as its retailing partner for the Chinese market.

    It is part of the Swiss company’s strategy to expand its business in the Asia Pacific region, and it says in a statement that the collaboration is for five years.

    In South Korea, K2 was appointed as its retailer in October, the Dynafit also opened an office in Tokyo.

    It has plans to expand its exclusive sportswear and skiing gear outlets from 120 to 160 in the next two years.

    Dynafit China will showcase its three collections – Vertical Running, Alpine Running and Ultra Running – at the sports business trade show ISPO Beijing, from February 24 to 27.

  • Toys”R”Us® Opens Its 100th Store In China

    Toys”R”Us® Opens Its 100th Store In China

    Ten years after first entering the market, Toys”R”Us, Inc., the world’s leading dedicated toy and baby products retailer, today announced that the company has opened its 100th store in China. The milestone achievement was marked by a grand opening celebration event that took place Saturday, January 16, at the APM Shopping Mall in Wang Fu Jing, one of the leading retail districts in Beijing, where Toys”R”Us® opened one of its 27 new stores across the country within the past year.

    “It’s our mission to be the best toy and baby products retail company in the world, and international expansion, particularly throughout China and Southeast Asia, continues to be an important part of our long-term growth strategy,” said Dave Brandon, Chairman and CEO, Toys”R”Us, Inc. “The opening of the 100th store in China represents a significant achievement for our business as it allows us to meet the increasing demand for high-quality children’s products and family entertainment experiences in this market.”

    Toys”R”Us opened its first store in China in 2006 and currently operates in 44 cities throughout the country, including six where the company established a presence for the first time last year. China has been one of the most important markets for the company’s global expansion plans, and growth in this region is expected to continue with the planned opening of more than 30 new Toys”R”Us stores in 2016.

    “The grand opening of our 100th store is a major milestone for Toys”R”Us on our exciting journey in China,” said Andre Javes, Managing Director, Toys”R”Us, Greater China and Southeast Asia. “What differentiates Toys”R”Us as a specialty toy retailer is the memorable shopping experience we provide for our customers. This includes a combination of the widest assortment of toys and baby products, including exclusive items not available anywhere else in the market, fun store layouts, interactive in-store experiences, product displays and demonstrations, activities and more.”

    Attending the iconic 100th store opening ceremony in the heart of the Capital were: Dave Brandon, Chairman and CEO, Toys”R”Us, Inc.; Dr. Victor Fung, Group Chairman, Fung Group; Monika Merz, President, Toys”R”Us, Asia Pacific; Pieter Schats, Executive Director of Fung Retailing Ltd; and Andre Javes, Managing Director, Toys”R”Us, Greater China and Southeast Asia, along with many important business partners and executives from the toy industry.

    As part of the grand opening, families were also invited to meet and greet popular mascots such as Geoffrey the Giraffe, Ultraman, Barbie™, Ninjago Kai, Balala Emma and more.

    Toys”R”Us at Beijing APM Shopping Mall Features Innovative Retail Environment
    The new store showcases the very latest in “retailtainment,” digital technology and customer interaction, making shopping at Toys”R”Us a unique and fun experience for kids and adults alike.

    Upon entering the store, customers are immediately immersed into the world of Star Wars™: The Force Awakens – the first-ever Star Wars movie released on the big screen in Chinese theaters – with life-size characters and dramatic scenes from the movie. Shoppers will also find interactive displays from LEGO® and TOMICA, a Balala magical mirror and more.

    Customers can further interact with the huge, 70-inch digital screen at the store entrance, enabling them to browse through promotional items, make purchases, take “selfies” with special photo frames, play games and easily become members of the company’s “Star Card” loyalty program.

    The Toys”R”Us store at Beijing APM also brings amazing exclusive products and assortments, which are not available anywhere else in the market. These private brands offer great value, quality and innovation from the Toys”R”Us brand consumers know and trust, and include FastLane®, Dream Dazzlers®, Universe of Imagination, Pavilion®, Just Like Home®, Edu Science®, You & Me, STATs® and Avigo®.

    In addition, consumers will find various new features throughout the APM mall, sponsored by Toys”R”Us.

    Toys”R”Us in China
     Toys”R”Us has been the leading dedicated retailer of toys and baby products around the world for more than 65 years. Toys”R”Us opened its first licensed store in Shanghai, China in 2006, and since then, has continued to expand aggressively in the country. In 2011, Toys”R”Us, Inc. formed a joint venture with its long-term license partner in China and Southeast Asia, Fung Retailing Ltd, for its businesses in the region, with stores in Brunei, China, Hong Kong, Malaysia, Singapore, Taiwan and Thailand, and became 70 percent majority owned and controlled by Toys”R”Us, Inc. and 30 percent owned by Fung Retailing Ltd.

    As of January 2016, the company has 100 stores in 44 cities across China, including: Beijing, Shanghai, Shenzhen, Chengdu, Chongqing, Hangzhou, Ningbo, Jiaxing, Jinhua, Shangyu, Nanjing, Suzhou, Nantong, Wuxi, Changzhou, Yancheng, Kunshan, Harbin, Shenyang, Changchun, Dalian, Tianjin, Baoding, Tangshan, Shijiazhuang, Zhengzhou, Jinan, Yantai, Zibo, Qingdao, Hefei, Wuhan, Changsha, Luzhou, Ganzhou, Xi’an, Kunming, Nanning, Guangzhou, Xiamen, Fuzhou, Zhuhai, Jinjiang and Zhongshan.

    Enhanced e-Commerce Business and Omnichannel Capabilities in the Chinese Mainland
    Toys”R”Us launched a T-mall Store in April 2012 and its own dedicated e-commerce website at Toysrus.com.cn at the end of the same year. Toys”R”Us, China also operates a mobile-optimized website, enabling tech-savvy consumers across the country to easily shop while on-the-go. Additionally, the company uses its “Ship from Store” capabilities to effectively transform the country’s existing Toys”R”Us stores into mini distribution centers by leveraging their inventory to fulfill online purchases.

    Now, millions of Mainland customers can access a wide assortment of toys, along with product authenticity and a toy safety guarantee from Toys”R”Us.

    Full Range of Toys
    Toys”R”Us provides a broad assortment of products from trusted domestic and international brands for children and their parents in China. Stores feature enticing product displays, demonstrations, “see-me touch-me” packaging, and a large number of products that are only available at Toys”R”Us. All products are made to the highest quality standards and have passed all required safety tests.

    As a global retailer, Toys”R”Us ensures country-by-country shopping patterns are taken into account at the local market level. Parents in China place great importance on the educational value of toys that help children learn and develop skills while they play. Within its Learning category, Toys”R”Us provides among the most comprehensive and widest selection of educational toys, including many uniquely designed by the company’s in-house team. These toys encourage skill development such as learning languages, mathematics, geography, color-differentiation and coordination.

    Digital and New Media Platforms
    Digital and new media is a booming business across China, with rapid growth of brands and stores across e-commerce websites and online instant messaging platforms.

    Mr. Javes also commented, “Toys”R”Us has 1 million followers in WeChat and continues to grow. WeChat followers have been expanding rapidly within the recent two years and we are seeing more than 80 percent of members join in our “Star Card” Membership Program via this social platform, where they can easily play our WeChat game, get the latest promotional information and explore bonus features, which enhance the fun of digital interaction. Along with the fast development of digital platforms such as mobile internet in China, we will continue to engage and excite our consumer on all their digital devices.”

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  • Apple Should Open More Outlets in China

    Apple Should Open More Outlets in China

    Apple has seen robust sales in China despite the country’s worsening economic situation. Last quarter, revenues from Greater China grew 99% year-over-year, confirming the management’s opinion that China sales have been strong. Chinese economic slowdown concerns have emerged yet again and it remains to be seen whether Apple will continue its strong performance in the region.

    In its latest note to investors, BofA/Merrill Lynch contends that Apple should open more retail stores in China if it wants to increase market share in the country. The idea is based on Merrill Lynch’s survey of 1,000 respondents across China, which was done to find a correlation between retail store presence and iPhone share/iPad ownership in the region.

    Through a regression analysis, the firm found high correlations between retail store presence and iPhone share and iPad ownership. Of the survey respondents, 24% own iPhones while 39% said that they intend to buy one, which shows that Apple could gain further share.

    Merrill Lynch notes that Apple currently has 26 outlets opened in 11 regions across mainland China. The company intends to increase that number to 40 by the middle of this year. Apple has also announced that it will open two more retail stores in January in Guangzhou (Guangdong region) and Nanjing (Jiangsu region). The firm’s analysis suggests that the four new store launches in January can generate an additional 2.99 million units.

    “We believe these store openings could lead to incremental iPhone units sold in the regions and help Apple continue to increase share in broader China,” analysts at Merrill Lynch said.

    In a prior research note, Merrill Lynch had upgraded Apple shares from Neutral to Buy. The firm said that its upward revision in the rating was based on the launch of iPhone 7, potential roll-out of iPhone 6c (5e), and increase in capital return program in April.

    Apple is expected to release its first quarter fiscal year 2016 (1QFY16) results after the markets close on January 26. The tech giant is expected to report revenues of $76.7 billion and adjusted earnings per share (EPS) of $3.24. Merrill Lynch expects Apple to post strong China sales.

    Chinese stocks dropped significantly last August, pointing to slowing growth in one of the world’s biggest economies. Questions were put forth regarding iPhone’s growth in the region at that time. In response to this, CEO Tim Cook told investors that China business has remained robust.

    In the last earnings call, Mr. Cook told the Street that he doesn’t believe Apple’s results in China are heavily dependent on small changes in growth in its economy. He further stated that in light of the number of customers coming into Apple stores and sales trends, it is hard to say that there is an economic slowdown in the country.

    According to the data from Strategy Analytics, China currently comprises 20% of Apple’s total iPhone unit sales. Hence, if Chinese sales are strong, it is very likely that Apple could overcome the tough comps set by the highly successful iPhone 6 and 6 Plus lineup.

  • Amazon China Registers As Ocean Freight Forwarder

    Amazon China Registers As Ocean Freight Forwarder

    Online retail giant Amazon has registered its China arm as an ocean freight forwarder, the US Federal Maritime Commission has announced.

    The move will give the retailer more control over shipping goods from its factories in China to customers.

    By expanding its logistics operations in this way, the retailer can cut costs with the possibility of being in a position to offer third-party logistics services at a later stage.

    In response to the news, Sian Hopwood, senior vice president for B2B operations at supply chain software supplier Kewill, commented, “Delivering products direct from manufacturers to consumers is not a new concept, but this is the first time we have seen this ‘drop shipping’ model on a global scale.”

    Retailers wanting to regain market share will have to step up their efforts to ensure they are able to respond more flexibly and responsively to demand – “importing stock as it is ordered rather than having to predict stockpiling requirements and risk warehousing unwanted items”, added Hopwood.

    “By removing the middleman, retailers can reduce costs and provide customers with an always-on, always-available shopping experience which traditional models can’t sustain.”

    With the retail environment still being in a state of flux with the rise of digital and mobile shopping, a key part of making this system work is visibility.

    “If companies are to retain customer trust, they will need to have supply chain management solutions in place to ensure shoppers know exactly what’s happening to their shipment.”

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  • Singapore developer plans healthcare hubs in 20 to 40 Chinese cities

    Singapore developer plans healthcare hubs in 20 to 40 Chinese cities

    Less than a year after making its first foray into China’s healthcare sector, Singapore developer Perennial Real Estate Holdings has now set ambitious goals for itself: to set up integrated healthcare hubs in 20 to 40 Chinese cities.

    The concept will be similar to that of the Perennial International Health and Medical Hub in south-western Chengdu city, which is touted as the largest integrated healthcare development in western China with 280,000 sq m of gross floor area.

    Located next to the Chengdu East high-speed rail station, the hub will include eldercare homes, hotels, serviced apartments, commercial offices and retail.

    Perennial chief executive officer Pua Seck Guan said at a briefing yesterday that the company is already in talks over similar projects in several cities.

    He hinted that they are provincial capitals and located in the western regions.

    “The projects should be located around transportation hubs to reach a sizeable population. Also, a capital city can provide sufficient human resources for hospitals,” said Mr Pua, at a media briefing yesterday after Perennial secured key tenants for its Chengdu project.

    Perennial, whose businesses were largely retail, residential, office and hotel till its entry into healthcare last July, entered a joint venture on Thursday with two Chinese firms – Shanghai Summit and Shanghai RST Chinese Medicine – to operate the eldercare segment of its Chengdu hub.

    Yesterday, Singapore healthcare operator Parkway Pantai held a lease-signing ceremony to set up the ParkwayHealth Chengdu Hospital that will occupy 48,000 sq m and provide up to 350 beds.

    It will be the first foreign tertiary hospital in western China and also a first for Parkway Pantai, which is a subsidiary of IHH Healthcare, the world’s second-largest healthcare operator by market capitalisation.

    Parkway Pantai Group CEO Tan See Leng said in his speech that the company is investing 900 million yuan (S$197 million) into the hospital, which is targeted to open next year. He added that the company decided to expand into Chengdu as it is one of the fastest-growing cities in western China and that the location at the Chengdu East rail station is ideal, providing transport to some 148 million people within a two-hour train ride.

    Mr Pua said Perennial and Parkway are working together because they are familiar with each other’s strengths, which is crucial for their first healthcare project and first hospital in China, respectively.

    Now with the key tenants settled, the next step is to ensure that the hub, which is set to complete construction this year, would be able to provide top-notch medical treatment and quality service, said Mr Pua.

    He also outlined potential challenges, such as the need to keep costs low as Perennial has to operate the hub over time, instead of just building and selling properties.

    “Another challenge is to win stakeholders in those cities over to our concept.”

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  • Louis Vuitton and Chinese dispute

    Louis Vuitton and Chinese dispute

    Luxury retailer Louis Vuitton is suing three individuals in China for selling counterfeit items on Alibaba’s online shopping outlet Taobao.

    Damages of 250,000 RMB ($37,900) are being sought by the LVMH-owned company, says a statement on a Beijing court’s website uploaded yesterday. It says the suits are against a person surnamed Liang and two with the surname Han, who were sentenced in 2014 for selling counterfeit Louis Vuitton clothing, shoes and handbags between 2011 and 2014.

    This move comes nine months after luxury conglomerate Kering pursued legal action over fakes on Alibaba’s platforms. The group sued Alibaba directly, filing the suit in the US rather than China.

    In 2013 LVMH signed a co-operation agreement with Taobao to fight fakes on its platforms. Under the agreement, Taobao agreed to proactively track down and remove listings of counterfeit LVMH items.

    Meanwhile, Alibaba has been working to defend its reputation. It hired a former counterfeit investigator from Apple in December as its new head of global intellectual property enforcement. This followed the American Apparel & Footwear Association calling on the US Trade Representative to add Alibaba back to its blacklist of “notorious markets” for fakes (it was removed in 2012). Alibaba has also hired extra staff to fight fakes and is releasing an English-language version of its intellectual property reporting system.

    The courts’ decisions on the Kering and Louis Vuitton lawsuits could have an impact on the way brands formulate their China anti-counterfeit strategy in the years to come, observes Jing Daily. Kering has challenges with its US lawsuit as the Bank of China has refused to comply with a subpoena to disclose information about counterfeiters’ bank accounts to the New York District Court. The bank is also appealing a $50,000-a-day fine imposed by the court, arguing that the order violates Chinese bank secrecy laws.

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  • Sa Sa feels pinch of Chinese policy

    Sa Sa feels pinch of Chinese policy

    China’s policy of one trip a week for mainlanders plus the strength of the Hong Kong dollar against a weaker yen have gouged sales for cosmetics retailer Sa Sa International.

    Both its retail and wholesale turnover dropped 14.2 per cent for the third quarter (October 1 to December 31), the company has announced. Turnover declined by 15.8 per cent in the Hong Kong and Macau markets, where same-store sales dropped 12.2 per cent.

    Overall, transactions were 7 per cent weaker, average sales per transaction fell 9.1 per cent and there was a 12.1 per cent dip in same-store sales. The group’s total turnover in other markets, including Mainland China, Malaysia, Singapore, Taiwan and online, dropped 6.7 per cent.

    Chairman/CEO Dr Simon Kwok says the impact of the “one-trip-per-week” policy had gradually gained momentum, leading to a notable year-on-year decline in the number of same-day visitor arrivals.

    “We expect the negative trend will continue to influence the local retail market.”

    In response, he says the group will optimise its product offering and enhance the shopping experience for its customers.

    Back in October, Sa Sa International Holdings already warned that its net profit for the six months to September 30 would be slashed in half because of the sluggish retail scene.

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  • African exports to China descend by 40 percent

    African exports to China descend by 40 percent

    African exports to China fell by 40 percent in 2015, China’s customs office reports. China is Africa’s greatest single trading partner and its interest for African products has fuelled the continent’s recent financial development. The decrease in exports mirrors the recent slowdown in China’s economy. This has, thus, put African economies under weight and to some extent represents the falling estimation of numerous African currencies.

    Exhibiting China’s previous year trading figures, customs representative Huang Songping advised that African exports to China aggregated $67bn (£46.3bn), which was 38% down on the figure for 2014. BBC Africa Business Report editor Matthew Davies says that as China’s economy sets out toward what numerous experts say will be a hard finding, its requirement for African oil, metals and minerals has fallen quickly, taking commodity prices lower.

    There is likewise less funds coming from China to Africa, with direct investment from China into the mainland falling by 40% in the initial six months of 2015, he says. In the mean time, Africa’s interest for Chinese products is rising. In 2015 China sent $102bn worth of products to the mainland, an expansion of 3.6%. A year ago, South Africa facilitated a China-Africa summit amid which President Xi Jinping declared $60bn of aid and loans, symbolizing the nation’s growing part on the Continent.

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  • 2 Reasons Why China’s Macro Woes Won’t Affect Apple, Inc. as Much as You Think

    2 Reasons Why China’s Macro Woes Won’t Affect Apple, Inc. as Much as You Think

    The market certainly woke up on the wrong side of the bed for 2016, and most fingers are pointed to troubling macro-economic data out of China along with The Middle Kingdom’s brutal market sell-off. The Shanghai Composite Index is already down 10% year to date, and it’s only been a week. You probably also saw those headlines about the day that the Chinese market was only open for less than 30 minutes before circuit breakers (which have since been suspended) were triggered, ending the day down 7%.

    Meanwhile, pessimism surrounding Apple continues to build as well, in part because China is such an important market for the Mac maker. But there are two important reasons why all of the China-related storylines won’t affect Apple as much as you might think.

    China’s stock market participation is very low
    It’s true that China’s stock market is largely dominated by retail investors instead of institutional investors (a stark contrast to the U.S.), with an estimated 90% of all capital accounts owned by retail investors. Chinese investors also tend to be short-term traders instead of long-term investors, which contributed to heightened volatility.

    But it’s also true that overall stock market participation is fairly low in China, so the gyrations aren’t directly affecting the average consumer. For example, the Southwestern University of Finance and Economics in Chengdu conducts a regular China Household Finance Survey led by professor Gan Li. According to the survey, just 6% of households in China owned stock during the first quarter of 2015.

    So while the volatility of the Chinese stock market makes for some panicky headlines, the average Chinese consumer’s discretionary spending and income is just fine. They can still go out and buy that iPhone.

    China’s slowing GDP growth is not affecting the mainstream consumer
    The other recurring theme is China’s slowing macroeconomy, as evidenced by decelerating GDP growth rates. But again, these GDP figures aren’t directly translating into reduced income or spending on the consumer level. Quite the contrary, in fact.

    Much of China’s GDP growth over the past decade has been driven by investing and exports, but China’s economy is now transitioning toward consumer consumption, which will only benefit consumer-oriented companies like Apple. Consider per-household annual consumption by category from 2005, along with forecasts through 2030, where discretionary categories are growing the fastest:

    China Spending

    Source: McKinsey.

    Or consider the fact that Apple’s China business has grown incredibly against a backdrop of slowing GDP:

    Aapl Gc Vs Gdp

    Source: SEC filings and The World Bank. China GDP growth measured in constant local currency. Calendar years shown.

    The rising middle class in China won’t be stopped, and that’s good news for Apple.

     

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  • ‘Don’t blame retail investors for China’s flash crash’

    ‘Don’t blame retail investors for China’s flash crash’

    Picture this: the market plunged 9 percent in around 30 minutes of hectic trading. Regulators raced to contain the damage, that was estimated in the trillions. Later, the plunge was repeated with a market collapse of 6.5 percent as 1,100 points were wiped in about five minutes. Trading was halted multiple times and circuit breakers were praised for preventing a full-on market crash of epic proportions.

    It just goes to show that this is an untrustworthy, poorly developed market that has to be managed externally by imposing trading halts.

    Hang on, there’s just one problem with this assumption. The 9 percent plunge happened on May 6, 2010. It was the infamous Flash Crash on the New York Stock Exchange. The second 6.5 percent fall was the August 24, 2015 flash crash, also on the NYSE.

    And rather than signaling the end of the financial world as we know it, markets simply shrugged their collective shoulders and moved on.

    But analysts seem to apply a different yardstick to the China market and are using this week’s Shanghai Composite flash crash to highlight what they see as China’s economic disaster.

    This is more than easily dismissed as double-standard analysis, because closer examination suggests some alternative explanations.

    Let’s first go back to the US flash crashes. The 2010 crash was widely attributed to the activity of exchange traded funds (ETFs). The 2015 crash was attributed to high frequency trading because sell algorithms cascaded in a falling market.

    The true reasons are certainly more complex, but it’s the nature of these suspects that is interesting because they highlight the connection between the derivative markets and the underlying market.

    One of the key connections is the rapid placement and withdrawal of trading orders that lies at the core of high frequency trading. These are placed in the futures and associated markets. In its subsequent investigation, the Commodity and Futures Trading Commission (CFTC) concluded that this activity was at least significantly responsible for order imbalances in the derivatives market, which in turn affected the stock market.

    The key feature is that these types of extreme and rapid market collapses are most often associated with markets dominated by derivative trading. These crashes are caused by institutional trading from ETFs and HFT. They are not caused by mums and dads trading because mums and dads simply do not act in such a coordinated fashion in such a short timeframe. Mums and dads also do not have the leverage to shift markets in this way within 30 minutes or an hour. That power lies in the hands of large-scale derivative traders.

    So, heres the rub. The onshore China market is dominated by retail traders. The offshore derivative market is dominated by institutional funds and ETFs and trading activity has been facilitated by the Shanghai-Hong Kong Stock Connect that opened in November 2014.

    Chinese authorities have been concerned for some time by allegations of Qualified Foreign Institutional Invetor (QFFI) funds being used in offshore shadow derivative trading. In June 2015 there were claims that the Shanghai index sell-off from the high of 5,176 was preceded by a spike in the placement and rapid removal of sell orders that is typical of HFT activity. It took the CFTC 4 years to deliver a final report on the 2010 Flash Crash so its unreasonable to expect a CSRC report on the June 2015 fall anytime soon.

    The January 1 Shanghai flash crash has all the characteristics of the NYSE flash crashes but in a market that is not dominated by fund managers and institutional trading. It’s the imposition of circuit breaker-thinking, imported directly from the flash crash-vulnerable NYSE market, that stopped this Shanghai flash crash from worsening.

    It’s convenient but far too simplistic to blame Chinese retail traders. The pattern of order placement in the physical and derivative markets need further investigation.

     

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  • What’s Driving China’s Stock Market Selloff?

    What’s Driving China’s Stock Market Selloff?

    Just as they did when Chinese stocks swooned in July, global investors appear to be learning the right lessons about China for all the wrong reasons. Investors who can see through the haze and confusion can keep picking up bargains in undervalued markets like Indonesia.

    First and foremost, the latest stock-market turmoil does not mean that China’s economy is in a meltdown. Yes, China’s economy is still slowing as investment retreats and exports decline. Spending by China’s emerging middle class remains a bright spot. But the service sector’s growth isn’t powerful enough to counteract the slowdown in China’s industrial sector. Most predictions are for growth of roughly 6.4% this year, slightly below the government’s 6.5% target.

    What’s driving the selloff? Not global investors jittery about China’s growth prospects. China’s markets remain highly restricted to foreigners, who represent a tiny fraction of trading. On the contrary, trading in China is dominated by domestic, retail investors. This makes the market relatively volatile. Retail investors everywhere tend to trade more frequently are more prone to herd behavior. Many in China fled the market after last summer’s turmoil, which has left the market in the hands of an even smaller group of jittery, retail punters.

    That’s why China’s new circuit breakers turned out to be such a bad idea. Intended to halt panics so cooler heads could prevail, the trading curbs proved too narrow for a market as volatile as China’s. In the U.S., a much less volatile market, trading pauses for 15 minutes if the S&P500 drops 7% or more and halts for the day only if the index falls 20%. China’s circuit breaker imposed a 15-minute halt after a 5% drop and halted trading if its CSI300 index fell 7%, a fluctuation all too common last year. So as stocks started falling, retail investors nervous they might be frozen into positions if the circuit breakers tripped joined the stampede to sell. The circuit breakers thus heightened volatility. Realizing this, regulators scotched the breakers Thursday night.

    Most of these domestic, retail investors in the stock market aren’t middle-class consumers. They’re relatively affluent individuals who invest a conservative portion of their net worth in stocks. Volatility in China’s stock market therefore poses little threat to the overall wealth of China’s middle class and its ability to spend.

    So what caused these wealthy punters to take flight? Because China’s economy is so tightly controlled by the government, and the stock market so dominated by big government-controlled companies, investors in Shanghai have long looked to signals on policy, rather than corporate profits, to drive markets. Beijing’s intervention in the stock market last summer has only reinforced this logic. So signals over the weekend that President Xi Jinping might favor painful economic reform over feel-good stimulus measures touched off this week’s selling.

    Does that mean we shouldn’t be worried? Absolutely not. While China’s slowdown by itself isn’t enough to derail global growth, it won’t help. As times get tougher, growing labor unrest is a worrisome red flag. And the more growth slows, the more difficult it will be for China Inc. to service a mountain of corporate and local government debt that by some estimates has swelled to 250% of GDP. China is inching closer to a possible credit crisis.

    That’s particularly true now that China has removed its gloves to join the global currency war already underway between Japan and Europe. It fired a shot across the bow in August with a one-time depreciation of its currency, the yuan. Then in December, the People’s Bank of China started marking the yuan down with the currencies of China’s major trading partners.

    Some economists believe most of that revaluation lower is complete. Not likely. Central banks in Europe and Japan, which are using weaker currencies to try to revive growth, will now likely need to push their own currencies lower still, which will prompt China to nudge the yuan lower with them. That creates a vicious circle of depreciation.

    Worse, China’s decision to move the yuan lower appears to be accelerating what was already a torrent of outflows by Chinese savers eager to get their cash out of the way of the slowing economy and a widening crackdown on corruption. China is trying to discourage the outflows by cracking down on foreign-exchange transactions and even trying to influence rates for yuan offshore. But the vacuum of funds out of banks is pushing up the cost of credit, forcing the PBoC to print yet more yuan to inject into the banking system – a measure that stands to weaken the yuan even further. And Jefferies warns that liquidity is likely to tighten even more ahead of the Lunar New Year holidays a month from now.

    A weaker yuan will ultimately be good for China’s exporters and stocks. But because it inflates China’s economy by exporting deflation, the cheaper yuan is bad for economies that rely on exporting to China, like Australia, or that are using a weaker currency to try to inflate their own growth, like Japan.

    Not surprisingly, stocks in Australia and Japan suffered the biggest declines in Asia outside China this week, falling 5.8% and 5.4%, respectively. Also hit hard was South Korea, which has one of the region’s highest exposures to China’s import demand. Stocks there have dropped 2.8%.

    But the turmoil doesn’t alter the overall outlook for regional markets this column laid out earlier this week. Because it’s most likely to enjoy government support, China’s stock market is still likely to outperform its neighbors’. And stocks in a handful of Asian markets still stand to exceed investors’ rock-bottom expectations. This week’s declines have made stocks in Jakarta, for example, even more attractive.

    Comments? E-mail us at wayne.arnold@barrons.com

    Comments? E-mail us at asia.editors@barrons.com

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  • Luk Fook same store sales down 26 pct in SARs for fiscal Q3

    Luk Fook same store sales down 26 pct in SARs for fiscal Q3

    Hong Kong-listed jewellery retailer Luk Fook Holdings (International) Ltd. saw a 26 per cent year-on-year decrease in its same store sales from Hong Kong and Macau shops for the three months ended December 2015, the biggest decline since the final quarter of 2014.

    During the third quarter fiscal, Luk Fook saw a decline of same store sales of 26 per cent year-on-year in gold from its shops in both Hong Kong and Macau, while that of gem-set jewellery fell 27 per cent, the company told the Hong Kong Stock Exchange after trading hours on Wednesday.

    The exact sales revenue figures were not disclosed in the retailer’s Wednesday filing, and the sales performance disclosed by the company only covered sales from its self-operated shops, while the sales of licensed shops and e-commerce business was excluded.

    The same store sales of Luk Fook’s group-wide retail business was down 25 per cent in the fiscal third quarter, as the retailer also saw a drop of 10 per cent in its shops in Mainland China.

    According to the filing, Luk Fook blamed the sales decline in the third quarter on ‘continuing overall sluggish retail sentiment’ and a relatively high base in sales figures.

    As at the end of last year, Luk Fook ran 96 self-operated shops on the Mainland, 47 shops in Hong Kong, 10 in Macau and 6 overseas. The jewellery retailer ran another 1,261 licensed shops on the Mainland and in Korea.

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  • Hong Kong Government Collaborates With China In Phasing Out Ivory Trade

    Hong Kong Government Collaborates With China In Phasing Out Ivory Trade

    This week, animal rights activists in Hong Kong are celebrating a huge win as their plea to eliminate global ivory trade has been heard. Hong Kong’s Chief Executive Leung Chun Ying announced in his annual policy address that the country will phase out on ivory trading in collaboration with China.

    CNN reported that Hong Kong was allegedly the world’s largest retail market for ivory and a facilitator of illegal ivory transport into mainland China.

    “The Government is very concerned about the illegal poaching of elephants in Africa,” Leung said in his speech, “It will kick start legislative procedures as soon as possible to ban the import and export of elephant hunting trophies.”

    Hong Kong’s government has also vowed to impose heavy penalties against those who partake in illegal ivory trade and importation

    China reportedly has better laws regarding ivory trade compared to Hong Kong.

    According to Huffington Post, 30,000 African elephants are killed every year for their tusks, hence putting the species at a risk of extinction.  The government has reportedly begun a crackdown on the illegal trade, and the action is already making a difference.

    Earth Torch News Network asserted that the activist group initially began pinning down perpetrators three years ago, although the government was not so keen on doing the same. Additionally, reports indicate that the import and export of ivory have been banned in Hong Kong since 1989. However, there have been loopholes in the enforcement of such prohibition, thus allowing the trade to propagate.

    Meanwhile, an estimated 16.7 tons of ivory have been confiscated in Hong Kong for the past three years.

    In other news, animal rights activists are calling other Southeast Asian countries, including Thailand, to emulate China, Hongkong and the United States in banning the domestic trade of ivory.

    Wild Life reported that new fears arise as South Africa is planning to propose the re-opening of a regulated trade of rhino horn. Once the bill is passed, elephant poachers are likely to venture into rhino poaching to supply investors.

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  • Burberry sees return to sales growth in China

    Burberry sees return to sales growth in China

    Luxury fashion group Burberry on Thursday announced a return to retail sales growth in China despite an economic slowdown, boosting overall results in its third quarter.

    The British handbag and clothing company reported overall retail sales of £603 million ($866 million, 794 million euros) in the October through December period, “as (sales in) mainland China returned to growth”, Burberry said in an earnings statement.

    China is in sharp focus for markets amid an overall slowdown for the world’s second largest economy.

    In the three months to the end of 2015, Burberry saw total underlying retail sales growth of 1.0 percent, an improvement on the 4.0-percent decline in its second quarter.

    Burberry’s financial year runs from April to the end of March

    On the downside, sales in Hong Kong fell by more than 20 percent owing to long-standing protests against China.

    All of Burberry’s Hong Kong stores remain profitable however thanks to cost controls, the company said in the statement.

    “The outlook for our sector remains uncertain,” said chief executive Christopher Bailey.

    “However, we are anticipating and responding to these changes through an intense focus on new growth opportunities.”

    Chief financial officer Carol Fairweather told a conference call with reporters that Burberry’s performance in France had been impacted by fewer tourists visiting from China and the Middle East following the Paris terrorist attacks in November.

  • Uniqlo struggles with currency and weather

    Uniqlo struggles with currency and weather

    Uniqlo, Asia’s largest apparel retailer, has delivered a disappointing set of results for the quarter to November 30.

    While revenue rose 8.5 per cent year on year to ¥520.3 billion (US$4.44 billion), profit fell 16.9 per cent to ¥75.9 billion ($647.1 million). Considerable depreciation of the Japanese yen was the main factor in a ¥29.0 billion fall in pre-tax profits, the company said.

    Uniqlo International sales also fell short of target in the first quarter, reporting a rise in revenue but a decline in profit (revenue: ¥196.9 billion (+17.2 per cent year on year), operating profit: ¥20.8 billion (-14.2 per cent)).

    “Unseasonal warm winter weather around the globe adversely impacted same-store sales at Uniqlo Greater China (encompassing operations in mainland China, Hong Kong and Taiwan), Uniqlo South Korea and Uniqlo US in particular, resulting in a lower than expected first-quarter performance and declining profits in all three of these areas.

    Meanwhile, Uniqlo Europe reported higher than forecast gains in both revenue and profit, and Uniqlo Southeast Asia and Oceania reported a steady operating profit, as expected.

    New store openings proceeded as planned, with a net 66 stores opened during the first quarter, mainly in Greater China and Southeast Asia. As a result, the total number of Uniqlo International stores had expanded by 169 year on year to 864 stores as at November 30.

    Uniqlo Japan fell short of expectations in the first quarter, declining in both revenue and profit Revenue was ¥230.9 billion (-0.7 per cent), operating profit ¥44.8 billion (-12.4 per cent).

    “While online sales expanded 23.2 per cent year on year, same-store sales declined 2.3 per cent, resulting the fall in revenue,” the company said.

    “In September and October, fall winter items such as cashmere sweaters, merino sweaters, gaucho pants and wide pants got off to a great start and sales proved strong, pushing same-stores sales higher as a result. However, the unexpected heatwave in November stifled demand for winter items, and led to a sharp drop in revenue.

    “On the profit side, hefty discounting of winter items in November squeezed the first-quarter gross profit margin, while lower than-expected first-quarter sales inflated the selling, general and administrative expenses to revenue ratio.”

    The number of directly run Uniqlo Japan stores, excluding 38 franchise outlets, totaled 806 stores at the end of November 2015. While that represents a net decrease of 18 stores year-on-year, 10 of these stores were converted from directly-run stores to new employee-franchise outlets.

    The group reiterated its goal of becoming the globe’s largest apparel retailer.

    “To this aim, we have focused our efforts on expanding Uniqlo’s global operations, boosting store numbers in each country where we operate, opening global flagship stores and large-format stores in major cities around the world, and offering exciting joint collections with well-known designers from around the world, such as Ines de la Fressange. This strategy is designed to both boost awareness and visibility of the Uniqlo brand and strengthen our global operational base. We are also actively promoting our GU brand by accelerating the opening of new stores in Japan and launching the label in the Chinese market.

    “We believe the GU operation has reached a key turning point in its growth and development as a second pillar brand for the group,” the company concluded.

    Uniqlo’s Global Brands division exceeded expectations in the first quarter by reporting a 17.4 per cent year on year gain in revenue to ¥91.8 billion, and a 29.7 per cent year on year gain in operating profit to ¥12.4 billion.

    “Within the Global Brands segment, our low-priced GU fashion casualwear label reported significant rises in both revenue and profit that surpassed our initial forecasts. GU reported double-digit growth in same-store sales on the back of strong sales of heavily advertised campaign items such wide pants, baggy sweaters and knitted bottoms.

    “Meanwhile, our Theory fashion brand and J Brand premium denim label both fell slightly short of target when they reported a decline in profits.”

    The company’s France-based Comptoir des Cotonniers and Princesse tam.tam labels reported lower-than-expected sales and a decline in profit, after the November terrorist attacks in Paris forced some stores to close temporarily.

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