As China approaches two significant public holidays, investor focus intensifies on consumer-related shares amidst ongoing challenges in spending recovery. The Mid-Autumn Festival from September 15-17 and Golden Week from October 1-7 will be crucial for gauging any potential rebound in consumer spending, which has been sluggish due to a downturn and deflationary pressures impacting the world’s second-largest economy.
Early indicators offer a glimmer of optimism. Pre-booking figures suggest increased travel demand compared to both pre-pandemic levels and the recent Dragon Boat Festival in June. Nonetheless, the extent to which consumers are willing to spend remains uncertain, despite governmental efforts to invigorate economic activity.
Marvin Chen, a strategist at Bloomberg Intelligence, notes, “Domestic travel may see some improvement, but spending could be constrained by budget-conscious behavior. While expectations may be subdued due to the broader macroeconomic conditions, any positive surprises could enhance market sentiment.”
Investor confidence in China’s stock market has been diminishing, clouded by a prolonged property crisis, geopolitical tensions, and weakening earnings. The CSI 300 Index is currently trading at its lowest since January 2019 and has dropped approximately 8% this year. Consumer staples have been hit particularly hard, falling more than 22%.
During the upcoming holidays, several sectors and stocks are expected to attract attention:
Travel:
Shares of companies in the travel sector, including hotels, airlines, and e-commerce platforms, may benefit from a resurgence in travel demand. Booking data for the Mid-Autumn Festival shows significant increases compared to the same period in 2019. Notable stocks to watch include Trip.com Group Ltd., H World Group Ltd., BTG Hotels Group Co., Haidilao International Holding Ltd., and Air China Ltd.
Shopping:
Consumer goods companies could see benefits from restocking efforts ahead of the fourth quarter festivals. An early Chinese New Year in 2025 and a lower base in the latter half of the year may bolster sales. However, despite potential short-term gains for baijiu distillers and beer producers, sluggish demand in the liquor sector could persist. Sales during the holiday season may not meet market expectations, according to Cailian.
Sportswear companies are expected to ramp up promotions during the upcoming holidays, extending through November’s Singles’ Day shopping event. Key stocks in this sector include Kweichow Moutai Co., Budweiser Brewing Co., China Resources Beer Holdings Co., China Tourism Group Duty Free Corp., Chow Tai Fook Jewellery Group Ltd., Sa Sa International Holdings Ltd., and Li Ning Co.
Leisure:
Leisure stocks may benefit as the experience economy continues to thrive in China. Consumers are spending more on services, although they remain cautious with goods purchases. Box-office companies are anticipated to gain from several film releases during the National Day holiday. Key stocks to monitor include Maoyan Entertainment, Wanda Film Holding Co., and casino operators MGM China Holdings Ltd., Wynn Macau Ltd., and Sands China Ltd.
