Chinese consumer and technology stocks to watch

On September 24th, the People's Bank of China, China Banking and Insurance Regulatory Commission, and China Securities Regulatory Commission announced their major stimulus policies at the State Council press conference. The publicized policies include: "reducing existing housing loan interest rates, further reducing reserve requirements, vigorously developing equity funds, and arrangements for mid-to long-term funds entering the market." The fundamental, underlying objective is for China to achieve its ambitious 5% growth target for 2024. The stocks of various Chinese sectors, whether listed on Chinese, Hong Kong, or American stock exchanges, experienced a bull run.

Chinese Stocks Most Impacted By the Government Stimulus Announcement

Immediately after the announcement, the triple-leveraged China Large-Cap ETF increased by 30% in a single day, attracting the attention of the entire market, while the Nasdaq Golden Dragon Index of China achieved its largest two-year increase. By Chinese industries, the top gainers were in consumer discretionary, internet, and brokerage with the largest increase of nearly 50% for the month.

Real Estate, Discretionary Consumer, and Materials Sectors

JPMorgan advised focusing on the real estate, discretionary consumer, and material sectors, as companies in those industries would benefit from lower mortgage rates and down payments. Such stocks include BEKE KE Holdings, JD.com, and TAL Education.  

Internet Platforms, Energy Vehicle Startups, New Consumer Trends, and Over-the-Air (OTA) and Travel

With the Chinese government's publicized interest rate cuts to stimulate consumer spending, the following companies are recommended by various financial institutions:

Internet Platforms

• BABA Alibaba, with share prices jumping 10% after the government announcement. Headquartered in Hangzhou, China, the technology company specializes in e-commerce, retail, internet, and technology. Even prior to the Chinese government's stimulus announcement, Ailbaba stock price increased after it released new video-to-text capabilities and AI models.

• BILI Bilibili is an online entertainment company headquartered in Shanghai, with a rising stock with above-average volume as well, which is generally a bullish sign. Bilibili specializes in user-generated videos, video-based consumption generally, and live broadcasting across diverse categories.

• PDD Holdings Pinduoduo has also experienced a price increase in recent weeks, especially since PDD Holdings operates Pinduoduo, an e-commerce platform that offers products across categories ranging from apparel to agriculture, food and beverages, and electronic devices. PDD Holdings also operates the budget-friendly online marketplace, Temu.

Energy Vehicle Startups

• Li Auto LI is headquartered in Beijing and designs, develops, manufactures, and sells premium smart electric vehicles with in-house research and development ranging from its proprietary range extension system, next-generation electric vehicle technology, and smart vehicle solutions.

• XPEV XPeng designs, develops, and manufactures smart electric vehicles, as well as subsidiary services including maintenance, ride-hailing, vehicle leasing, and supercharging services. Xpeng is headquartered in Guangzhou.

New Consumer Trends

• POP MART is an entertainment and culture company that is Beijing-based and has built a comprehensive operation platform that focuses on all aspects of the toy industry chain. The four main areas of focus are: artist discovery, IP incubation and operation, consumer reach, and the promotion and cultivation of trendy play culture. As of December 2019, POP MART had 114 offline stores with 21 outside of China in countries including Japan, South Korea, the United States, and Singapore.

• MSNO MINISO is also an entertainment and culture company,  but based in Guangzhou. MINISO specializes in developing a range of trendy retail and wholesale lifestyle products. MINISO's products include toys, gifts, stationery, small electronics, snacks, makeup, and bag accessories.

Over-the-Air (OTA) and Travel

• TCOM Trip.com provides travel-related services, including hotel accommodations, airline tickets, packaged tours, corporate travel management services, property management systems, and advertising services. It is based in Shanghai.

• EDU New Oriental is Beijing-based and provides private educational services. The New Oriental holding company operates the following segments: Educational Services and Test Preparation Courses, Private Label Products and Livestreaming E-Commerce, Overseas Study Consulting Services, and Educational Materials and Distribution.

Wall Street Analysis Takeaways

Overall, Wall Street analysis of the outlook on Chinese stocks is mostly bullish with short- and long-term factors at play. The Chinese government's recently announced reserve and rate cuts are intended to drive domestic economic development, contributing to Chinese indexes increasing overnight.

The appreciation of the renminini (RMB) and the long-term undervaluation of Chinese assets may also attract more global funds from foreign investors. With the gradual improvement of domestic Chinese companies' performances, the valuation of their stocks may undergo reasessment. Such reassessment may also sway hedge funds' allocation to the Chinese stock market, with it now hitting only 6.8%, a five-year low with room for increased shareholding. With potentially increased liquidity in the market, and what JPMorgan Chase analysts describe as the Chinese government's most extensive stimulus policies since 2015, now may be a make-or-break moment for retail and institutional investors alike. Take advantage of the opportunity by trading now with moomoo.