Advertisement
Consumer stocks lead China rally even as surging Covid-19 infections in big cities cause jitters
- Consumer companies have led a rally in China’s stocks since the easing of Covid-19 restrictions released pent-up demand
- A gauge of consumer staples on the CSI 300 index has gained 28 per cent since the start of November
Reading Time:2 minutes
Why you can trust SCMP
Zhang Shidongin Shanghai
Consumer companies have led a rally in China’s stocks since the easing of Covid-19 restrictions released pent-up demand, even as major cities experience a spike in infections that is putting a strain on the healthcare system.
Advertisement
A gauge of consumer-staple stocks on the CSI 300 index, mostly comprising baijiu distillers such as Kweichow Moutai and Wuliangye Yibin, has gained 28 per cent since the start of November, making it the best performer among 10 industry groups.
A measure of consumer-discretionary companies from carmakers BYD and SAIC Motor to household appliance manufacturer Midea Group, has climbed 20 per cent in the same period.
The pattern dovetails with the consensus view that consumer stocks stood to benefit the most from China’s exit from its harsh zero-Covid policy because of pent-up demand.
The sector is starting to shine at a time when China is striving to move to a more consumption-based economy from one that is driven by investment, and the outlook for external demand is clouded by policy tightening overseas.
“The valuation expansion has been fully priced in after the loosening of pandemic controls,” said Feng Yi, an analyst at Donghai Securities. “The focus will soon shift to the industry fundamentals.”
Advertisement
Advertisement