Overview of the Surge#
Shares of major food-delivery companies in China saw significant increases recently, following actions by regulators to address the intense competition that has been affecting profitability in the sector.
Stock Performance#
Meituan's shares closed 14% higher in Hong Kong, while Alibaba Group and JD.com saw gains of 4.6% and 4.9%, respectively. In premarket trading in the U.S., Alibaba and JD also experienced increases of 4.6% and 4.3%.
Regulatory Actions#
This stock rally was prompted by a seminar organized by China's market regulator, which focused on curbing unfair competition practices. The regulator's website highlighted a column from the state-backed Economic Daily newspaper, which criticized ongoing price wars in the industry. The column pointed out that these pricing battles have created a “vicious cycle,” harming profitability and hindering broader consumer spending recovery.
Impact of Competition#
The competition in the food-delivery market has intensified, especially since JD.com announced its entry into the sector last year. This led to multiple rounds of subsidies from companies like Alibaba and Meituan to attract users. Meituan reported its largest annual loss since 2021 earlier this year, attributing it to the fierce competition. JD.com has also introduced initiatives to support catering merchants on its platform, offering commission-free services for a year to encourage participation. As consumer spending remains weak, JD has launched discount campaigns to draw in users, further contributing to the price competition affecting its share price.