Chinese Consumer Stocks Surge Amidst Commitment to Domestic Demand Expansion

by Warren Seah

By Sherry Qin

Chinese consumer stocks experienced a significant surge in morning trading sessions on both the Hong Kong and Shanghai markets. This surge was driven by investor confidence in a faster recovery of domestic consumption.

The rally was initiated after China’s top decision-making body, the Politburo, reaffirmed its commitment to expanding domestic demand and boosting economic growth through increased consumption during its July meeting held on Monday. As part of this commitment, the Politburo announced sector targets for support, which included automobiles, electronics, home-related goods, as well as services such as sports, leisure activities, and tourism.

This news follows the recent policy packages introduced by the National Development and Reform Commission on July 21, which aimed to support consumption in the automobile and electronics sectors.

The announcement had an immediate positive impact on the stock market, particularly in the home appliance and furniture sectors. Stocks of companies like Guangdong Hotata Technology Group and Guangdong Piano Customized Furniture saw a significant rise of 10%, which is the maximum daily increase permitted in China.

In Shanghai, liquor stocks also experienced a broad increase. Shede Spirits reached its limit-up, while Luzhou Lao Jiao recorded a rise of 7.4%.

However, some economists have noted that the details provided in the meeting readout lack a big-bang stimulus for immediate growth. HSBC Economist Erin Xin mentioned in a note that although services consumption has been the driving force of the recovery, it has not fully expanded to other areas of consumption. The future expansion may depend on improvements in household confidence and further stabilization in the housing sector.

Despite this observation, Hong Kong saw positive movements in certain stocks. climbed 4.1%, while popular hotpot chain Haidilao International jumped 4.2%.

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