By Peter Garnry, Head of Equity Strategy at Saxo

Peter Garnry

The best performing equity theme basket so far this year has been the Chinese consumer & technology basket, because of the sentiment shift in China over the reopening policy, intentions to stimulate, bailout real estate developers, and finally the green light for Ant Group ( Alibaba ’s financial arm) to raise more share capital which could pave the way for an IPO later this year. While China is still a difficult trade, the other strong performer in the first week of trading - which is our e-commerce basket - is more interesting.

The e-commerce basket is up 7% this year which is in stark contrast to last year’s horrible performance. There are likely three drivers behind the positive performance and they can all continue throughout 2023 making potentially e-commerce the big positive surprise this year.

1. Container freight rates are almost back to the lows levels from before the pandemic started taking costs and supply chain delivery times back to normal levels. This improves profitability and customer satisfaction.
2. Resilient households in the US and Europe despite inflation and lower real incomes. Consumer companies surprised on revenue growth during the Q3 earnings season and those consumer companies that have reported for fiscal quarters ending in October and November have extended this trend.
3. Cost cutting among e-commerce companies will also significantly improve profitability this year and beyond the wage costs online advertising prices have also come down reducing customer acquisition costs.