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XPeng shares skyrocket despite sales miss

 

Thursday, December 01, 2022

The news shaping the markets today

Ukraine announced plans to increase security at all its embassies after an employee of the Madrid embassy was injured receiving a letter bomb. The US dollar index traded lower on prospects of easing geopolitical tensions.


China’s Caixin general manufacturing PMI rose to 49.4 in November, from 49.2 in the previous month, lending support to the CNY/USD forex pair.


Australia’s private new capital expenditure on plant machinery declined by 1.6% during the third quarter, following 2.2% growth in the prior period. The AUD/USD pair rose in forex trading this morning.


South Korea’s economy grew by 0.3% during the three months to September, lending some support to the KRW/USD forex pair.


Japan’s manufacturing PMI fell to 49 in November, from 50.7 in the previous month, Despite the manufacturing sector contracting for the first time since January 2021, the JPY/USD pair rose in forex trading this morning.

 

What’s happening: Shares of XPeng rose sharply on Wednesday, after the company released results for its third quarter.

What happened: The Chinese electric vehicle maker reported weaker-than-expected sales for the latest quarter.

The company also warned of a sharp decline in vehicle deliveries for the current quarter.

How were the results: The EV maker reported a double-digit rise in revenues for the quarter ended September 30, but the figure still missed market views.

  • Sales surged 19.3% year-over-year to 6.82 billion yuan or $0.96 billion, missing the consensus estimates of $1.01 billion.
  • Non-GAAP net loss per ADS came in at 2.59 yuan or 36 cents per share, in-line with Street expectations.

Why it matters: Chinese electric vehicle makers, including Nio, Xpeng and Li Auto, have been facing challenges due to the country’s strict zero-covid policy. The surge in infections and resulting lockdowns impacted vehicle production in the latest quarter.

Xpeng’s quarterly vehicle deliveries grew 15% year-over-year to 29,570 units, while the deliveries of the P7 smart sports sedan declined 15% to 16,776 in the quarter.

Net loss came in at 2.38 billion yuan, compared to a year-ago loss of 1.59 billion yuan. Cost of sales grew 20.4%, while R&D expenses surged 18.5%. The company’s gross margins shrank by 90 basis points to 13.5%, while vehicle margins contracted by 200 basis points to 11.6%.

Xpeng said its vehicle deliveries are expected to more than halve in the current quarter and that it could report an even wider quarterly loss due to an increase in expenses.

The company guided to vehicle deliveries between 20,000 and 21,000 in the fourth quarter, down 49.7-52.1% versus deliveries of 41,751 vehicles in the same period last year.

Management also guided to a decline in revenues by 40.4%-43.9% to between 4.8 billion yuan and 5.1 billion yuan.

How shares responded: XPeng’s US-listed shares jumped 47.3% to close at $10.81 on Wednesday, following the release of quarterly results. The stock has lost around 53% over the past six months.

The company’s Hong Kong-listed shares also climbed 16% on Wednesday, mirroring gains in the region’s markets on prospects of China relaxing its strict covid-19 curbs.

What to watch: Traders will keep an eye on the covid-19 restrictions in China, following wide protests in the country.

The markets today

US stocks will be in focus today ahead of a basket of economic reports

Context: Wall Street closed sharply higher on Wednesday, following comments from US Federal Reserve Chairman Jerome Powell.

Details: Markets started the session on a cautious note on Wednesday, ahead of a speech by Fed chief Jerome Powell.

Data released on Wednesday showed the US economy expanding by a higher-than-expected 2.9% in the third quarter, versus the initial reading of 2.6%. Moreover, the ADP report showed a lower-then-expected rise in private payrolls in November.

China had reported weak business activity earlier on Wednesday. An escalation in protests against the government’s strict covid-19 policy also raised prospects of some easing of restrictions in the country.

US markets cheered Powell’s speech at the Brookings Institution, which suggested that the central bank could begin scaling back rate hikes from December, despite the Fed chief saying that inflation remained top priority.

Powell said it made sense to “moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down” and that the time for moderating the pace “may come as soon as the December meeting.”

The Federal Reserve raised interest rates by 75bps to 3.75%-4% at its November meeting, the sixth hike in a row.

The Dow Jones index jumped more than 737 points, or 2.18%, to close at 34,589.77 on Wednesday. The S&P 500 added 3.09% to settle at 4,080.11, while the Nasdaq 100 gained 4.58% to reach 12,030.06.

What are expectations: Investors await economic reports on jobless claims, PCE price index and manufacturing PMI from the US today. The number of people filing new claims for jobless benefits, which rose by 17,000 to 240,000 in the week ending November 19, is expected to increase further to 258,000 in the recent week. Analysts expect the personal consumption expenditure price index to grow 0.3% in October, unchanged from September’s rate. The ISM Manufacturing PMI is projected to decline to 50 in November, from 50.2 in the previous month.

Other Markets: European trading indices closed higher on Wednesday, with the FTSE 100, DAX 40, CAC 40 and Stoxx Europe 600 up by 0.81%, 0.29%, 1.04% and 0.63%, respectively.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY  – 136.60 and 136.87 Positive
GBP/USD – 1.2075 and 1.2087 Positive
Gold – 1786.29 and 1788.59 Positive
Silver  – 22.454 and 22.500 Positive
Nikkei 225 – 28275.34 and 28305.84 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0429, 0.18%) Dow ($34,570, -0.08%) Brent ($86.75, -0.3%)
GBP/USD (1.2084, 0.22%) S&P500 ($4,081, -0.01%) WTI ($80.38, -0.2%)
USD/JPY (136.79, -0.91%) Nasdaq ($12,029, -0.11%) Gold ($1,788, 1.6%)

What else to watch today

Russia’s manufacturing PMI and money supply M2, Germany’s retail sales and manufacturing PMI, Turkey’s manufacturing PMI, foreign exchange reserves and Central Bank of Turkey’s meeting summary, Eurozone’s manufacturing PMI, unemployment rate and European Central Bank’s general council meeting, Spain’s manufacturing PMI and new car sales, Italy’s manufacturing PMI, new passenger car registrations and unemployment rate, France’s manufacturing PMI and car registrations, South Africa’s manufacturing PMI and total vehicle sales, UK’s manufacturing PMI and nationwide house price index, India’s money supply M3, Brazil’s GDP growth rate, balance of trade and manufacturing PMI, Mexico’s manufacturing confidence index and manufacturing PMI, US Challenger job cuts, personal spending, personal income, continuing jobless claims, manufacturing PMI, construction spending, and natural gas stocks change, Canada’s labour productivity and manufacturing PMI, as well as Argentina’s central bank interest rate decision.


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