China’s two imminent public holidays, the Mid-Autumn Festival (Sept. 15-17) and Golden Week (Oct. 1-7), are set to spotlight consumer-related shares amidst a challenging economic backdrop. Despite ongoing struggles with spending recovery and deflation risks, these holidays could provide critical insights into consumer behavior and market trends.
Holiday Consumption Focus
With the Mid-Autumn Festival and Golden Week approaching, investors are closely monitoring consumer spending patterns. The current economic climate, characterized by a spending downturn and deflationary pressures, raises questions about the potential for a spending rebound during these holidays.
Emerging Positive Signs
There are early indications of improved travel demand, with pre-booking data showing increased interest compared to pre-COVID levels and the Dragon Boat Festival in June. However, despite these signs, consumer spending remains cautious. Marvin Chen, a strategist, notes that while domestic travel numbers might see some growth, budget-conscious spending could temper overall consumer enthusiasm. He suggests that any unexpected positive trends could significantly boost market sentiment.
Challenges Facing China’s Stock Market
China’s stock market has faced persistent challenges, including a prolonged property crisis, geopolitical tensions, and weakened earnings. The CSI 300 Index is currently trading at its lowest level since January 2019, down about 8% for the year. Consumer staples have been particularly hard hit, shedding more than 23% in 2024. On Friday, shares in this sector fell further, with notable declines in baijiu bellwether Kweichow Moutai Co. and airlines, the latter affected by Citigroup Inc.’s downgrade due to concerns over weakening demand.
Stocks and Sectors to Watch During the Holidays
Travel
Shares in travel-related companies are expected to benefit from ongoing recovery in travel demand. Data from travel booking platform Feizhu indicates a significant increase in hotel, car rental, and attraction bookings for the Mid-Autumn Festival, with double-digit growth compared to 2019. Key stocks to watch include:
- Trip.com Group Ltd.
- H World Group Ltd.
- BTG Hotels Group Co.
- Haidilao International Holding Ltd.
- Air China Ltd.
Shopping
Consumer companies might see a boost from channel restocking for the upcoming festivals, aided by an early Chinese New Year in 2025 and a lower base in the latter half of the year. While there are expectations for short-term gains for baijiu distillers and beer brewers, sluggish liquor demand might persist due to ongoing consumer confidence issues. 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.
- Li Ning Co.
Leisure
The leisure sector could benefit from the growing experience economy in China, where spending on services is increasing despite a cautious approach to goods. Box-office companies may also experience a boost from new movie releases scheduled for the National Day holiday. Key stocks to monitor include:
- Maoyan Entertainment
- Wanda Film Holding Co.
- MGM China Holdings Ltd.
- Wynn Macau Ltd.
- Sands China Ltd.
Conclusion
As China approaches its key public holidays, the focus on consumer-related stocks becomes increasingly pertinent. While positive trends in travel bookings and potential boosts in retail and leisure sectors are anticipated, the overall economic environment remains fraught with challenges. Investors will be keenly watching these holidays for any indications of a recovery in consumer spending and its impact on the market.
Related Topics:
