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Alibaba Group Holding Limited (NYSE:BABA) and peer Chinese technology stocks are trading lower Monday after China's economy grew slower than expected in the second quarter, with a protracted property downturn and job insecurity stalling recovery efforts.
The world's second-largest economy expanded by 4.7% from April to June, missing the 5.1% forecast by analysts and marking its slowest growth since Q1 2023.
Alibaba's domestic rivals, including PDD Holdings Inc. (NASDAQ:PDD), Baidu, Inc. (NASDAQ:BIDU), JD.Com, Inc. (NASDAQ:JD) and Bilibili Inc. (NASDAQ:BILI), are trading lower on Monday following the dismal macro report.
The report also hit Chinese electric vehicle stocks, including NIO Inc (NYSE:NIO), XPeng Inc (NYSE:XPEV) and Li Auto Inc (NASDAQ:LI).
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The consumer sector is particularly concerned, where retail sales growth has slowed to an 18-month low due to deflationary pressures forcing price cuts on cars, food, and clothing.
"Overall, the disappointing GDP data shows that the road to hitting the 5% growth target remains challenging," said Lynn Song, chief economist for Greater China at ING, Reuters reports.
The ongoing property crisis worsened in June as new home prices dropped at the fastest pace in nine years, weakening consumer confidence.
This decline in property prices has also constrained local governments' ability to generate revenue through land sales, making economic recovery more difficult.
Analysts anticipate more policy easing, especially in the fiscal and housing sectors, to counteract the slowdown.
Goldman Sachs reduced its forecast for China's 2024 growth from 5.0% to 4.9%, citing the need for further stimulus measures. The National Bureau of Statistics (NBS) reported that quarterly growth came in at 0.7%, down from a revised 1.5% in the previous quarter, according to Reuters.
China has increased infrastructure spending and invested in high-tech manufacturing to offset weak domestic demand and a struggling property market. Despite this, both the yuan and Chinese stocks fell following the disappointing growth data, though markets later rebounded on expectations of more stimulus.
The slow growth in retail sales, rising unemployment, and reduced wages have left consumers cautious about spending.
In response, China's central bank governor has pledged to maintain a supportive monetary policy.
Price Action: BABA shares are trading lower by 2% to $78.05 in the premarket session at the last check on Monday.
Discliamer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo via Shutterstock
