Chinese stock traders seek Golden Week boost after sharp sell-off

(Bloomberg) – The Golden Week holiday in China will be a crucial time for stock traders looking for new market momentum, after a brutal year that pushed a key benchmark to its lowest level in two years. .

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The CSI 300 index has lost more than 14% this quarter, buffeted by national Covid restrictions and real estate problems, as well as a global sell-off triggered by the Federal Reserve’s tightening. Spending during the seven-day holiday beginning Oct. 1 will be scrutinized to determine whether the economy is emerging from a trough or remaining in the doldrums.

The period, usually a peak season for travel and consumption, takes on even more significance this year as it comes just two weeks before the Party congress which will be held twice a decade. Lower spending during the holidays can disappoint traders and add to selling pressure, although it can also provide additional economic stimulus when leaders meet.

“As far as retail sales are concerned, spending sentiment appears more subdued this year due to lingering concerns about the economy and Covid,” said Catherine Lim, senior analyst for Bloomberg Intelligence. “I don’t expect domestic tourism and box office to see significant year-over-year growth, if any.”

Here are the sectors investors are watching to gauge market momentum:

Travel

Chinese carriers are among the worst performers on the Bloomberg Asia Pacific Airlines Index this year amid tight border restrictions.

Analysts still expect domestic holiday demand to boost airline stocks, though travel will still remain a fraction of pre-pandemic levels.

The coming period will serve as a catalyst for the airline industry and investors should consider “actively” buying related stocks, according to Zhongtai Securities Co.

“It is quite certain that weak aviation demand will improve slightly” and “the sector has long-term investment value,” analyst Du Chong wrote in a note.

According to the report, Air China Ltd., China Eastern Airlines Corp., Spring Airlines Co., Shanghai International Airport Co. and Shenzhen Airport Co. deserve special attention. Air China shares have gained nearly 15% from the August low.

Tourism

Authorities have told citizens to minimize travel to other cities during the holidays to prevent the spread of Covid, increasing stocks related to staycations, hotels around major cities and travel agencies specializing in short-distance tours .

Tour operators for scenic spots and companies with vertical business chains along the industry, such as China CYTS Tours Holding Co., Jiangsu Tianmu Lake Tourism Co. and Songcheng Performance Development Co. could outperform their peers, the report wrote. Avic Securities Co. analyst Pei Yifan in a report.

Tourism-related stocks in China bottomed after Hong Kong and Macao eased travel rules, and any sign of a loosening grip from mainland authorities could further fuel gains. China Tourism Group Duty Free Corp. is poised for the first in three monthly gains, up nearly 1% ashore.

Retail expenses

The recovery in retail spending this year has been limited by intermittent shutdowns in major cities, with the CSI 300 sub-gauge for consumer staples and discretionary stocks trending lower since mid-year .

A growing number of analysts predict a rebound in consumption from the fourth quarter, anticipating a boost from the Party Congress. Premier Li Keqiang said supportive policies should be fully implemented in the fourth quarter to promote a steady recovery, a CCTV report revealed on Thursday.

Box office

Moviegoer numbers will be watched closely after Covid outbreaks dampened box office growth this summer. China International Capital Corp. expects holiday ticket sales to fall from a year earlier, even in the most optimistic scenario.

Still, “if top films perform well with high-quality content and word-of-mouth, the total box office could get a boost,” analysts including Zhang Xueqing wrote this week.

The Maoyan Entertainment ticketing platform can publish sales statistics in real time.

Shares of filmmakers such as Zhejiang Huace Film & Television Co., Bona Film Group Co., China Film Co. and Beijing Enlight Media Co. could benefit from their high-quality content, CICC analysts said.

(Updates throughout)

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