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    401(k) auto-enrollment features don’t help savings as much as expected, study finds

    401(k) plan policies like auto-enrollment and auto-escalation have become popular.
    They aim to boost workers’ retirement savings.
    Pioneering researchers found that the policies may be less effective than they’d previously thought. However, the effects are still positive, they said.

    Images By Tang Ming Tung | Digitalvision | Getty Images

    Employers are increasingly putting workers’ 401(k) plan savings on autopilot.
    But the positive impact of automated retirement savings is more muted than initially thought, new research finds.

    Previously “underexamined” factors — like workers cashing out 401(k) balances when they leave a job — “meaningfully reduce” the long-term impact of policies like automatic enrollment and automatic escalation, according to a new paper published by the National Bureau of Economic Research.
    Importantly, some of the paper’s co-authors — James Choi of Yale University, and David Laibson and John Beshears of Harvard University — are behavioral economists who pioneered early research into the positive effects of automatic enrollment.
    “They are like the OGs [originals],” said David Blanchett, head of retirement research at PGIM, an investment manager. “These are the people who’ve been doing research on this topic now for decades.”

    ‘Not as positive as we had previously thought’

    Automated savings has been a cornerstone of 401(k) policy since Congress passed the Pension Protection Act of 2006.
    Policies like auto-enrollment and auto-escalation aim to boost the size of employees’ nest eggs, by automatically enrolling workers in their company 401(k) and then raising (or “escalating”) their savings rate over time.

    In this way, people’s tendency towards inertia works in their favor.

    About two-thirds of 401(k) plans were using auto-enrollment as of 2022, according to survey data from the Plan Sponsor Council of America, a trade group. Of them, 78% used auto-escalation.
    Overall, their effect on savings is positive, “just not as positive as we had previously thought based on the research we had done before,” Choi said in an interview.
    The group’s initial research didn’t track results for workers who left jobs where they’d been automatically enrolled.
    This research update sought to do a broader analysis, incorporating factors like job turnover, Choi said.
    More from Personal Finance:You may be paying fees for cash back at retailersWhy some young adults are disconnected from the job marketThe benefits of giving to a 529 college savings plan
    Overall, Choi and his co-authors recently found that auto-enrollment raised average 401(k) contribution rates by 0.6 percentage points of income over workers’ careers.
    That’s a 72% decrease in effectiveness from the 2.2-percentage-point boost that was extrapolated by the “results of early pioneering papers,” the paper said.
    “You’re talking 1.6% of income less saved per year,” Choi said. “If you were to just add that up over a 40-year career, you’re talking more than a half year of income saved.”
    When also accounting for compounding interest on those savings, it can amount to a “quite substantial” financial difference, he added.

    The impact of 401(k) leakage

    The disparity is largely a function of so-called “leakage” from 401(k) plans. meaning the early withdrawal of funds before retirement.
    About 40% of workers who leave a job cash out their 401(k) plans each year, according to the Employee Benefit Research Institute. Such leakage amounted to $92.4 billion in 2015, according to EBRI’s most recent data.
    Workers may withdraw 401(k) plan funds before their employer match is fully vested, meaning they’d forgo that free money.

    Additionally, just 43% of workers defaulted into auto-escalation of their savings rates ultimately accepted a higher contribution rate after one year, the National Bureau of Economic Research paper found.
    By comparison, early research conducted by behavioral economists like Richard Thaler and Shlomo Benartzi estimated that share around 85%.
    Job turnover also complicates auto-escalation in addition to auto-enrollment, PGIM’s Blanchett said.
    For example, a worker’s escalated contribution rate may reset at a lower savings rate if they were to join a new employer’s 401(k) plan.
    While auto-escalation isn’t necessarily a reliable way to get people to save more money, auto-enrollment has proven “very successful,” Blanchett said.

    He believes the effectiveness of auto-enrollment shouldn’t be judged based on 401(k) leakage, which is a separate policy issue, he said.
    “I think auto-enrollment does a spectacular job at getting individuals in the plan,” Blanchett said. “But we still have this massive leakage issue. It still exists whether you have auto-enrollment or you don’t.”
    That said, there’s room for improvement with automated savings.
    “I’d like us to get to a point where 7% or 8% is the median default savings rate,” Blanchett said.
    When coupled with an employer match, the typical worker would be saving 10% or more of their salaries, a bar workers should generally strive for, he said. More

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    How Vladimir Putin hopes to transform Russian trade

    Vladimir Putin is spending big on his war in Ukraine. The Russian president has disbursed over $200bn, or 10% of GDP, on the invasion, according to America’s Department of Defence. He now plans to invest heavily in infrastructure that will enable his country’s economy to flourish even while cut off from the West. Over the next decade, the Russian state expects to funnel $70bn into construction of transport routes to connect the country to important trade partners in Asia and the Middle East. Russia’s far east and high north will receive the lion’s share. A smaller sum will go on the International North-South Transport Corridor (INSTC), a project designed to link Russia and the Indian Ocean via Iran. Officials promise growth in traffic along all non-Western trade routes. More

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    Abercrombie & Fitch posts 21% sales gain, hikes outlook despite ‘increasingly uncertain environment’

    Abercrombie & Fitch handily beat Wall Street’s expectations as the apparel company posted another quarter of torrid growth.
    Despite the strong results, CEO Fran Horowitz pointed to an “increasingly uncertain environment” as macro conditions worsen.
    The longtime mall retailer is seeing gains in its Hollister brand and international markets.

    An Abercrombie & Fitch store in New York, US, on Monday, Nov. 20, 2023. Abercrombie & Fitch Co. is scheduled to release earnings figures on November 21. 
    Stephanie Keith | Bloomberg | Getty Images

    Abercrombie & Fitch’s revenue grew 21% during its fiscal second quarter as the apparel company builds on its torrid growth. 
    The sales gain, which follows 16% growth in the year-ago period, led the company to issue bullish guidance for the current quarter. Still, its full-year outlook was largely in line with estimates as it prepares for one fewer week this year than last. 

    CEO Fran Horowitz – who often says good companies win in any economic environment – may be bracing for a turbulent second half of the year because for the first time in four quarters, she referenced the uncertain state of the economy in the company’s earnings release.
    “We delivered a strong first half of the year, and we are increasing our full-year outlook. Although we continue to operate in an increasingly uncertain environment, we remain steadfast in executing our global playbook and maintaining discipline over inventory and expenses,” said Horowitz. “We are on track and confident in our goal to deliver sustainable, profitable growth this year, while making strategic long-term investments across marketing, digital and technology and stores to enable future growth.”
    The company’s shares — which are up nearly 89% this year — dropped about 9% in premarket trading.
    Here’s how Abercrombie did compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

    Earnings per share: $2.50 vs. $2.22 expected
    Revenue: $1.13 billion vs. $1.10 billion expected

    The company’s reported net income for the three-month period that ended Aug. 3 was $133 million, or $2.50 per share, compared with $57 million, or $1.10 per share, a year earlier.  

    Sales rose to $1.13 billion, up about 21% from $935 million a year earlier. 
    During the quarter, same-store sales jumped 18%, driven by better-than-expected summer and back-to-school selling. 
    For the current quarter, Abercrombie expects sales to rise by a low double-digit percentage, better than the 8.9% growth that LSEG analysts had expected. 
    Abercrombie raised its full-year sales guidance from 10% growth to a 12% to 13% increase, which is roughly in line with the 12% rise that LSEG analysts had expected. 
    The company’s fiscal 2024 will have one fewer week than fiscal 2023, which is likely weighing on its full-year guidance. Abercrombie expects the loss of one selling week will have an $80 million impact on its holiday quarter, or 5.5 percentage points. For the full year, the company expects it to hit sales by $50 million, or 1.2 percentage points. 
    Over the last year, Abercrombie has become known as retail’s biggest comeback story, and investors have been watching to see if the company can keep up its growth. 

    Abercrombie & Fitch advertisement.
    Courtesy: Abercrombie & Fitch

    Horowitz has looked to international markets and the company’s Hollister and Abercrombie Kids brands as growth vectors, which are already boosting sales. 
    During the quarter, sales at Hollister jumped 17% while comparable sales rose 15%. In the company’s Europe, Middle East and Africa division, sales climbed 16%. 
    Costly international expansion was one of the missteps that weighed on Abercrombie’s performance in the past, but the company is taking a different approach this time around.
    Earlier this month, it announced a partnership with Haddad Brands – a licensor of children’s wear – to create new distribution channels for Abercrombie Kids and grow the product line to include infant and toddler categories. 
    “As we work to diversify A&F Co.’s channel mix and drive sustainable, profitable growth, we are thrilled to partner with Haddad Brands to build on our success and create an opportunity to grow the brand in the years ahead by engaging with new customers globally,” Horowitz said in a statement at the time. 
    Products from Abercrombie Kids are set to be available in Haddad Brands’ showrooms globally next month.

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    Foot Locker comparable sales grow for the first time in six quarters

    Foot Locker beat Wall Street’s estimates on the top and bottom lines as it posted comparable sales growth for the first time in six quarters.
    The sneaker company also saw its gross margin expand for the first time in more than two years.
    CEO Mary Dillon told CNBC Foot Locker is exiting a number of international markets and moving its headquarters from New York City to Florida.

    A Foot Locker store near the Times Square neighborhood of New York, US, on Monday, Nov. 13, 2023.
    Bing Guan | Bloomberg | Getty Images

    Foot Locker on Wednesday said comparable sales grew for the first time in six quarters as its efforts to refresh its stores and improve the customer experience continue to bear fruit. 
    The beleaguered sneaker company’s same-store sales grew 2.6% during its fiscal second quarter, far better than the 0.7% uptick that analysts had expected, according to StreetAccount. Its gross margin also expanded for the first time in more than two years. 

    Despite the positive trends, the company’s shares dropped about 8% in premarket trading.
    “The Lace Up Plan is working,” CEO Mary Dillon said in a press release, referencing the company’s turnaround strategy. “Our top line trends strengthened as we moved through the quarter, including a solid start to Back-to-School. We were also particularly pleased to deliver stabilization in our Champs Sports banner.” 
    Here’s how Foot Locker did compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

    Loss per share: 5 cents adjusted vs. 7 cents expected 
    Revenue: $1.90 billion vs. $1.89 billion expected

    In the three-month period that ended Aug. 3, Foot Locker had a loss of $12 million, or 13 cents per share, compared with a loss of $5 million, or 5 cents per share, a year earlier. Excluding one-time items, Foot Locker posted a loss of 5 cents per share. 
    Sales rose to $1.90 billion, up about 2% from $1.86 billion a year earlier. 

    For the current fiscal year, Foot Locker largely maintained its guidance and continues to expect sales to be in a range of a 1% decline to 1% growth from the prior year – better than the 0.4% decline that analysts had expected, according to LSEG. 
    Foot Locker also stood by its adjusted earnings per share guidance. It expects earnings to be between $1.50 and $1.70 – much of that range ahead of the $1.54 that analysts had expected, according to LSEG. 
    Since former Ulta Beauty boss Mary Dillon took the helm of Foot Locker about two years ago, she has worked to transform the company and ensure that it stays relevant in a world where brands aren’t as reliant on multibrand retailers as they were in the past. 
    Dillon has worked to repair the company’s relationship with its biggest brand partner, Nike, and has also taken a hard look at its sprawling, but aging, store fleet, where the company does about 80% of its sales. The company plans to spend $275 million upgrading its stores this year, and it expects to have two-thirds of its fleet remodeled by the end of fiscal 2025.
    In an interview with CNBC, Dillon said the store investments are leading to increased conversion, basket size and profitability, and better performance for Foot Locker’s women’s business.
    “The reason that we’re doing it is that it is working for us, both in terms of enhancing a customer experience and a striper [store employee] experience, but also the financial returns,” said Dillon. “The performance is ahead of what we thought.”
    In a series of new megastores Foot Locker is building in hotspots like New York City and Paris, the retailer is working hand in hand with Nike to develop some portions of the shops.
    “With Nike, this has been since Day One, a high priority for me, and really building a partnership that isn’t just about like, what number of shoes are we going to sell, but how do we think about using consumer insights to mutually grow our businesses together,” said Dillon. “For us and Nike, it’s about the places that we really connect.”
    Dillon has also worked to streamline costs at Foot Locker. On Wednesday, the company said it was closing its stores and e-commerce operations in South Korea, Denmark, Norway and Sweden, and will rely on a third party for operations in Greece and Romania, where it plans to expand its reach, according to Dillon. In all, 30 of Foot Locker’s 140 stores in the Asia-Pacific region and 629 in Europe will be closed or go under a new operator as part of the changes. 
    Foot Locker’s Champs banner, which has been dragging down the company’s overall performance, is also showing some signs of improvement. During the quarter, comparable sales were down 3.9%, which is an improvement from the 25.3% decline it saw in the year-ago period.
    Foot Locker is also planning to move its global headquarters from New York City to St. Petersburg, Florida, in late 2025 and plans to maintain only a limited presence in the Big Apple moving forward. 
    “The intent of the relocation is to further build on the Company’s meaningful presence in St. Petersburg and to enable increased collaboration among teams across banners and functions, while also reducing costs,” Foot Locker said in a news release. 
    Dillon told CNBC the move will increase margins by 0.2 percentage point by 2027, but the decision wasn’t just based on saving money.
    “We’ve got a big center of gravity already in St. Pete … many of our executives are there. A lot of our commercial teams,” said Dillon. “We think actually bringing more people together for collaboration is going to matter and that’s also part of this. It’s not just about saving money. It’s about, how do we really continue to build on this momentum?”
    The company isn’t planning to make employees relocate and Dillon, who is based in Chicago, won’t be forced to become a super commuter, either.
    “I am traveling, I would say, 90% of the time, to our teams around the world, and to our brand partners, and to investor meetings and to events,” said Dillon. “I spend a good chunk of time in New York, I spend a lot of time in St. Pete, I spend a lot of time in Amsterdam where we have our headquarters, and visiting our brand partners. So I’m planning to keep my primary residence in Chicago, but the way that this has been working is really, I think, working pretty well so we’re going to continue to do that.”
    As it improves stores, products, and the customer experience online and in stores, Foot Locker is managing to drive sales even as its core consumer continues to feel the pressure of consistent inflation and high interest rates – indicating that Dillon’s efforts are working. 
    “We’re not expecting our customer to get, like, less pressured or more pressured. We’re just trying to say this is a category they care about,” said Dillon. “How can Foot Locker be the best to serve their needs? And I think our results are showing that that’s working.”
    As of Tuesday’s close, shares of the company are up more than 5% this year, compared with Nike’s stock, which has fallen more than 21% in the same time period.
    Demand has undoubtedly slowed across the retail industry, but consumers are still spending. They’re just being far choosier on who they’re spending with — which has made execution that much more important. 
    “Our strategies are building momentum as we look to the remainder of the year,” said Dillon in a statement. “I remain confident that we are taking the right actions to position the Company for its next 50 years of profitable growth and create long-term shareholder value.”

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    U.S. government researchers visit a Korean mine as the race against China for critical minerals heats up

    U.S. government researchers recently visited a South Korean mine to assess progress towards boosting supply of a critical metal called tungsten from areas outside China, the mine operator said Wednesday.
    The Sangdong Mine, owned by a subsidiary of Canada-based Almonty Industries, is set to resume operations this year.
    With China dominating over 80% of the metal’s supply chain, Almonty claims the mine could potentially produce 50% of the rest of the world’s supply of tungsten — an extremely hard metal used for making weapons, semiconductors and industrial cutting machines.

    Workers in July 2019 expand a mine in Germany intended to increase supplies of tungsten and fluorspar. 
    Picture Alliance | Picture Alliance | Getty Images

    BEIJING — U.S. government researchers recently visited a South Korean mine to assess progress towards boosting supply of a critical metal called tungsten from areas outside China, the mine operator said Wednesday.
    The Sangdong Mine, owned by a subsidiary of Canada-based Almonty Industries, is set to resume operations this year. Tungsten is an extremely hard metal used for making weapons, semiconductors and industrial cutting machines.

    With China dominating over 80% of the metal’s supply chain, Almonty claims the mine could potentially produce 50% of the rest of the world’s tungsten supply.
    The U.S. has not commercially mined tungsten since 2015, according to the latest annual report from the U.S. Geological Survey, a government agency that analyzes the availability of natural resources.
    Four mineral resource scholars visited the Sangdong Mine in a trip led by Sean Xun, assistant chief at the agency’s National Minerals Information Center, the report said.
    The U.S. Geological Survey would make a “significant update” on its assessment of the mine in its 2025 report due out in the first three months of next year, it added.

    The agency did not immediately respond to a request for comment made outside of U.S. business hours.

    The Biden administration has identified critical minerals and announced tariffs on tungsten and others as part of a broader effort to bolster national security.
    “Of the 35 mineral commodities deemed critical by the Department of the Interior, the United States was 100 percent reliant on foreign sources for 13 in 2019,” according to the U.S. Geological Survey.
    Almonty has said it’s spending at least $125 million to reopen the Sangdong Mine, which closed in the 1990s.
    China, in the past year and a half, has started to use its leverage in parts of the global critical mineral supply chain to control exports.
    Beijing has so far avoided any restrictions on tungsten. But forthcoming rules to limit exports of a similar metal called antimony have raised expectations that tungsten will soon be subject to more Chinese export restrictions.
    “If Donald Trump wins the US presidency and follows through on his threat to dramatically hike tariffs on China, Beijing might respond with new export controls on critical minerals or deploy existing controls more forcefully,” Gabriel Wildau, managing director at consulting firm Teneo, said in a note Tuesday.
    “Chinese regulators may also apply controls selectively, denying minerals to specific foreign companies that are viewed as supporting Washington’s technological containment agenda.”
    He added that the U.S. Energy Department has already awarded $151 million in grants to encourage domestic mining and processing of critical minerals, and western nations are expected to respond to Beijing’s “calibrated weaponization of critical minerals by accelerating efforts to reduce dependence on China.” More

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    Lego revenue jumps 13% in first half of 2024, boosted by Lego Fortnite and diverse brick sets

    Lego said revenue during the first six months of the year jumped 13%, reaching 31 billion Danish krone, or about $4.65 billion.
    The company is seeing strength across its portfolio, especially with Lego Icons and Lego Creator, and through its partnership with Epic Games’ Fortnite.
    While consumers in China are spending less frequently and less on big-ticket items, Lego still sees “long-term potential” in the area.

    Customers at a Lego store in Shanghai, China, on Feb. 3, 2024.
    Costfoto | Nurphoto | Getty Images

    An inflation-fueled sales slump hit the toy industry in the first half of 2024, but one company is gaining market share brick by brick.
    On Wednesday, Lego said revenue during the first six months of the year jumped 13%, reaching 31 billion Danish krone, or about $4.65 billion.

    Niels Christiansen, CEO of the privately held Danish toymaker, told CNBC that the company is seeing strength across its portfolio, especially with Lego Icons and Lego Creator, and through its partnership with Epic Games’ Fortnite.
    Last year, Lego saw a trend of consumers “trading down” or opting for lower-priced sets, while still buying the same volume as the year before. This year, volume is up, Christiansen said.
    “To the extent they traded down last year, they’re not trading further down,” he said. “So that has stabilized. And we see almost all of the growth is actually growth in volume.”

    Meanwhile, publicly traded rival Mattel saw net sales fall 1% in the first six months of 2024 and Hasbro reported that its net revenue fell 21% between January and the end of June. Mattel is facing tough comparisons from toy sales fueled by “Barbie” in 2023, and Hasbro is still reeling from its divestment of eOne.
    Lego has continued to build on pandemic-era growth with a diverse slate of products that cater to kids and adults alike. In addition to sets tied to popular franchises such as Harry Potter and Star Wars, Lego also has innovative design options for consumers to build flowers and succulents, famous works of art and animals.

    Sales in the U.S. and Europe remain strong, Christiansen noted, while China sales are flat. He said consumers in the region are spending less on bigger-ticket items, and their frequency of purchasing is down.
    However, Lego is not giving up on expansion in China. Christiansen said there is still “long-term potential” in the area.
    Of the 40 Lego stores that opened in the first quarter, 20 were in China. Similarly, of the 60 planned openings in the second half of the year, 20 are set for China.

    Sustainability

    Christiansen also touted Lego’s sustainability efforts. So far this year, the company has nearly doubled the amount of renewable and recyclable materials it uses in its bricks compared to full-year 2023.
    “That’s a good milestone,” he said. “That’s a good step forward. [We are] spending quite significantly on that in a couple of ways, primarily in buying material that is more expensive, because mass balance material is more expensive than just standard.”
    Christiansen noted that Lego is not passing that cost on to consumers.
    “By actually being willing to pay a premium to get to this product, we also created an incentive for [suppliers] to actually develop the kind of products and to establish more production capacity for these type of products. We are working really as an industry need to try to put more speed on that entire process.”
    Over the next few years, Lego hopes to source half its raw materials from sustainable sources.

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    JD.com shares climb after announcing $5 billion share buyback, outperforming decline in Hang Seng

    Shares of JD.com inched up about 1.2%, outperforming the Hang Seng Index’s decline of 0.82% on Wednesday.
    The announcement is JD.com’s second buyback this year, after announcing a $3 billion buyback in March.

    JD.com set up an Innovative Retail division that houses its grocery business 7Fresh.
    Bloomberg | Bloomberg | Getty Images

    Hong Kong-listed shares of Chinese online retailer JD.com climbed 1.2% on Wednesday, outperforming the decline on the Hang Seng index after the firm announced a $5 billion buyback late Tuesday.
    U.S. listed shares of the firm rose 2.24% on Tuesday after the announcement. Both JD.com’s Hong Kong and U.S. shares have dropped about 20% year to date.

    In comparison, Hong Kong’s benchmark Hang Seng index was down about 0.82% Wednesday, but is up about 4% for the year so far.

    Stock chart icon

    The announcement is JD.com’s second buyback this year, after announcing a $3 billion buyback in March.
    In response to the move, Chelsey Tam, senior equity analyst at Morningstar, said that the decision to announce the share buyback is “not surprising.” She explained, “It is a common theme in China when share prices and growth are low.”
    Tam also pointed to Vipshop, another Chinese e-commerce player that has increased its own share buyback program last week.
    China’s e-commerce sector has been dogged by a slow domestic economy.

    Earlier this month, Alibaba’s second-quarter results missed expectations on both the top and bottom lines. On Monday, Temu-owner Pinduoduo saw its worst ever session after its second-quarter results missed both revenue and earnings per share expectations.
    Back in February, Alibaba announced a $25 billion share buyback after it missed revenue targets for the fourth quarter of 2023. More

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    Chinese EV company Xpeng sees shares pop 6% after it launches mass-market car

    Xpeng shares rose after the Chinese electric car company said prices for its new mass-market Mona brand would start as low as $16,812, far below that of Tesla’s Model 3.
    The Chinese automaker said orders for the Mona M03 electric coupe exceeded 10,000 just 52 minutes after the car’s formal launch Tuesday evening in Beijing.
    Xpeng shares remain more than 45% lower for the year so far.

    He Xiaopeng, founder of Chinese EV company Xpeng, said on Aug. 27 that the startup’s next ten years will focus on integrating artificial intelligence.
    CNBC | Evelyn Cheng

    BEIJING — Xpeng shares rose after the Chinese electric car company launched its new mass-market Mona brand on Tuesday with prices starting as low as $16,812, far below that of Tesla’s Model 3.
    The Chinese automaker said orders for the Mona M03 electric coupe exceeded 10,000 just 52 minutes after the car’s formal launch in Beijing.

    Xpeng’s U.S.-listed shares closed up 6.5% in New York trading on Tuesday, while its Hong Kong-traded shares rose nearly 2% early Wednesday morning.
    “With cars priced under $20,000, China is further cementing its new position as the world center for automotive manufacturing,” Michael Dunne, founder and CEO of consulting firm Dunne Insights, said Wednesday on CNBC’s “Squawk Box Asia.”
    “China can produce cars more cheaply than anyone else in the world,” he said.

    Stock chart icon

    Xpeng shares extended gains from Monday after a filing showed the company’s founder and CEO, He Xiaopeng, bought at least 1 million shares each of the company’s stock traded in the U.S. and Hong Kong.
    The total U.S. purchase was worth nearly $10 million, according to the filing, giving He about 18.8% of the company’s total issued share capital.

    Xpeng shares have lost more than 45% so far this year.
    Tesla shares closed nearly 2% lower on Tuesday. Shares of Chinese electric car companies Zeekr and Li Auto rose, while those of Nio closed mildly lower.
    — CNBC’s Sheila Chiang contributed to this report. More