— U.S.-Listed Chinese Companies Lose $100 Billion in Value; First Republic Shares Plunge; UBS-Credit Suisse Restructuring Drags on Profit; China Ends PCR Requirement for Inbound Travel; Biden Announces 2024 Re-Election Bid; McDonald’s Same-Store Sales Surge; 3M Revenue Falls, Plans 6,000 Layoffs
1. U.S.-Listed Chinese Companies Lose $100 Billion in Value
Today, American Depositary Receipts (ADRs) of Chinese tech giants such as Alibaba and JD.com all declined, and the Nasdaq Golden Dragon China Index fell for the sixth consecutive session.
Since early April, the total market value of Chinese companies listed in the U.S. has shrunk by $100 billion.
After China’s reopening, global investors regained confidence in China’s economic recovery, triggering a rare stock rally for Chinese firms. However, current geopolitical tensions between the U.S. and China have led investors to grow cautious and gradually reduce exposure.
Sources revealed that in the coming weeks, President Biden plans to sign an executive order to restrict U.S. corporate investments in China.
Strategists at Morgan Stanley disclosed that this month, long-only fund managers have been the primary sellers of Chinese equities.
Chinese company ADRs in the U.S. have erased all gains since December.
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2. First Republic Shares Plunge
First Republic Bank’s latest quarterly report shows that customer deposits fell 41% in Q1 to $104.5 billion, well below the average analyst estimate of $137 billion, highlighting the lingering effects of the recent regional banking crisis.
First Republic announced it will lay off 25% of staff and cut non-essential expenses. However, analysts worry that following the deposit exodus, it will be harder for the bank to remain profitable amid high inflation.
This morning, First Republic’s shares plummeted 22%, erasing all of this month’s gains.
On March 16, major banks injected $30 billion into First Republic, which temporarily alleviated the run.
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3. UBS-Credit Suisse Restructuring Drags on Profit
UBS’s latest quarterly report shows Q1 net profit of $1.03 billion, falling short of the $1.86 billion forecast. Its wealth management division posted $4.79 billion in revenue, while investment banking brought in $2.43 billion—both slightly below expectations.
In Q1, high-net-worth clients poured $28 billion into UBS, including $7 billion in the 10 days following the announcement of its acquisition of Credit Suisse.
UBS CEO Sergio Ermotti said it is very important to retain as many of Credit Suisse’s assets and clients as possible.
However, in Q1, Credit Suisse wealth management clients withdrew $53 billion, and deposits were not restored after the merger was completed.
This morning, UBS shares fell 5.4%.
UBS’s Q1 net profit was its lowest in more than three years.
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4. China Ends PCR Requirement for Inbound Travel
Today, Chinese Foreign Ministry spokesperson Mao Ning announced at a press conference that starting April 29, travelers to China will no longer be required to provide negative PCR test results, and airlines will no longer inspect nucleic acid test documentation.
Government data show that in Q1, international flights to China were only 12.4% of 2019 levels, indicating that recovery in air travel remains slow.
Subhas Menon, Director General of the Association of Asia Pacific Airlines, said that although China has dropped the PCR requirement, airfare remains expensive and passport/VISA renewal processing is still slow, so it may take at least a year for travel to China to return to pre-pandemic levels.
Starting April 29, travelers need only provide rapid antigen test results, with no more PCR requirement.
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5. Biden Announces 2024 Re-Election Bid
Today, U.S. President Joe Biden released a video formally announcing that he has decided to run for re-election in the 2024 U.S. presidential race.
Eighty-year-old Biden said he hopes to win re-election and complete the work he has begun, while reassuring Americans not to worry about his age.
If Biden is re-elected, he would be 86 years old at the end of his next term, and many Americans believe his physical condition may not support another four years.
Following the video’s release, Biden will formally begin fundraising. In 2020, he raised $1 billion for his campaign, and he may need even more this time.
Biden’s approval rating on economic issues stands at just 37%, and 38% on Ukraine policy.
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6. McDonald’s Same-Store Sales Surge
McDonald’s latest financial report shows that global same-store sales rose 13% year-over-year, beating the average forecast of 8.2%. Over half of the company’s revenue comes from international markets, and all regions reported same-store sales above expectations.
Q1 earnings per share (excluding certain items) reached $2.63, also beating estimates, showing that inflation has not diminished consumer enthusiasm for the fast-food giant.
So far this year, McDonald’s shares have gained 11%, outperforming the S&P 500.
McDonald’s said sales growth was driven by selective price increases, and notable gains in digital orders and delivery.
Earlier this year, McDonald’s announced layoffs of several hundred employees, incurring $180 million in restructuring costs, and also plans to cut white-collar wages.
Both same-store foot traffic and sales exceeded expectations, unaffected by inflation.
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7. 3M Revenue Falls, Plans 6,000 Layoffs
Manufacturer 3M announced it will lay off 6,000 employees to address declining order demand in key markets.
So far this year, 3M has announced a total of 8,500 layoffs—9% of its workforce. The layoffs are expected to save the company $900 million annually.
CEO Mike Roman said the restructuring will simplify and strengthen the supply chain structure and improve go-to-market operations to enhance margins and cash flow.
Demand for 3M’s pandemic-related products, such as masks, has dropped, and weak economic conditions have also reduced demand for consumer and electronics products. As a result, organic sales declined 4.9% in Q1, the steepest drop since the pandemic began.
3M manufactures more than 55,000 products, including electronics, display materials, medical products, and household goods.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.