Chinese consumer stocks to buy even if the overall market rally fades

[Pelican Press 0]

******** consumer stocks to buy even if the overall market rally fades

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is set to report on Thursday. Hong Kong-based AlphaHill Capital is looking specifically for ******** consumer names with free cash flow growth, said Siliang Jiang, the firm’s partner and portfolio manager. He noted the narrative around China may have turned significantly gloomier in the last five years, but he does not expect China will repeat Japan’s “lost decades” due to its far larger market that can absorb the cost of research and development. Jiang expects the ******** consumer will start to turn around in the second half of this year or next year. There are already a few green shoots. China’s “Consumer Confidence Index (CCI) edged up in the past 9 months, despite falling property prices and fears of ‘household balance sheet recession ‘. That said, the current CCI reading at 89 is still well below the pre-COVID levels at ~120,” Bank of America analysts said in report in late April. “We advise investors to focus on firms that can create value for consumers – value for money, functional value, and/or emotional value,” the report said. Two of their picks based on positive free cash flow are Li Auto and New Oriental Education . Based on their expectations of future cash flow, the analysts also like the Beijing-Shanghai High Speed Railway operator, a state-owned company listed in Shanghai. They noted its potential to hike prices while benefiting from an increase in travel post-Covid. Last week, ******** media reported that many of China’s high-speed train operators will raise ticket prices by nearly 20% for certain routes, which include travel around Shanghai. State-owned transportation and utilities companies are able to increase their profit margins by raising prices in China’s current economic environment because they have monopoly power, said Liqian Ren, leader of quantitative investment at WisdomTree. The firm has an ETF for tracking non-state-owned ******** companies. “How long this tactical rebound is going to [last] probably depends on the economic data in the next couple weeks,” she said. “Considering China isn’t stimulating too much, that means the ******** economy is not as bad as [much] of the negative sentiment,” Ren added. China is due to release major economic data Friday local time on May 17. Analysts polled by Reuters expect a 3.8% increase in retail sales in April from a year ago. — CNBC’s Michael Bloom contributed to this report.

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Stock markets,Markets,Market Insider,Tencent Holdings Ltd,Alibaba Group Holding Ltd,Alibaba Group Holding Ltd,PDD Holdings Inc,Li Auto Inc,Li Auto Inc,New Oriental Education & Technology Group Inc,New Oriental Education & Technology Group Inc,China,Economic events,business news
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