Alibaba & the 4,000 rural villages
Not sure you can even call "China might doing OK" a counter-contrarian viewpoint these days since pretty much everyone is seemingly on board with China's economy being in a worse state than reported meme.
Certainly most media has been consistently predicting slower consumption growth for the Chinese economy of late.
In this context I thought it would be interesting to take a look at the Chinese e-commerce company Alibaba Group's latest actual quarterly earnings, and here they are for Q3 2015:
If group financials are not your thing - and who could blame you for that? - here's what they mean.
Alibaba's key operational metric Gross Merchandise Volume (GMV) - meaning the total gross value of goods transacted across its platforms - increased in the third quarter to RMB713 billion, which at an exchange rate of 6.3356 equates to a quarterly GMV of US$112 billion, for a 28 per cent increase year-on-year.
By the way, that's an annual figure of around US$450 billion!
This was a stronger result than had been expected, but it is worth noting that the prior corresponding period (Q3 2014) figures showed year-on-year growth of a whopping 48.7 per cent.
As for revenue, these figures were also better than expected at RMB22.171 billion (US$3.488 billion) for a year-on-year increase of 32 per cent.
Those are the key metrics in numbers, but if pictures are more your thing, here are the pictures...
Diluted Earnings per Share (Non-GAAP) increased by an impressive 30 per cent year-on-year, while a strong free cash flow of US$2.1 billion was generated for the third quarter.
Alibaba reported that it expanded the presence of its ecosystem from cities into an additional 4,000 rural villages in the September quarter alone.
Since last year's IPO the share price has increased from its listing price of $68 to around $80, although this is well below the post-float euphoric peak of $119.
Now granted, Alibaba's continued growth may not be representative of all consumer activity, and clearly China is not home to a magic carpet economy where a genie can grant a company such as Alibaba 50 per cent annual revenue growth in perpetuity (no wait...that was Aladdin's Lamp).
Whatever, where reported quarterly revenues are showing year-on-year growth of 32 per cent to US$3.5 billion, could it just be that the Chinese consumer and his smartphone are having a happier time of it than many would have you believe?
Turnbull bounce...for real? (Capex)
All very interesting, of course, but the real excitement this week lies closer to home in the quarterly capital expenditure figures for the third quarter, which are due to be released on Thursday.
The June 2015 data (which I looked at in more detail here) showed that actual new capital expenditure had declined by more than 10 per cent year-on-year.
After a catastophic Estimate 2 for 2015/16 capital expenditure, Estimate 3 improved by around 10 per cent to just shy of $115 billion, but even this "upbeat" result estimate represented a huge decline of more than 23 per cent from the Estimate 3 for 2014/15 (with estimated mining investment down horribly by more than 37 per cent! And people were recommending property in mining regions...ouch).
Again, a picture tells a better story here, and particularly the gaping hole that a similar result could potentially leave in the Aussie economy over the next year.
Since the result last quarter we have a new Prime Minister (as is generally the way in Australia these days) and unlike the last PM this one is said to be inspiring confidence in consumers, while business conditions are also now alleged in some parts to be above their long term average.
Will this be reflected in the updated capex estimates for 2015/16, or is the economy doomed to the fate of further interest rate cuts next year?
Given that we know for certain that mining investment is going down the gurgler, and manufacturing isn't big enough to make much of a difference at the national level, a decent result for "Other Selected Industries" would see the Estimate 4 for the 2016 financial year increasing to above $120 billion, while a "bullish" result would be in the region of ~$125 billion.
This will be a hugely significant survey for Mr. Turnbull and the Australian economy. Don't miss it!
The Sydney auction market is crumbling apace in the outer western suburbs, where recent investors must be sweating bullets in response to some of the numbers being reported (or perhaps not being reported might be more accurate).
At the other end of the scale there was a ripping preliminary auction clearance rate of 82.6 per cent for the Eastern Suburbs (CoreLogic-RP Data).