Investment opportunities out of China’s July Politburo meetings - Charts of the Week

Understanding sectors that may benefit after July Politburo meeting in 18 charts

Week of Jul 27, 2023

This edition of "Charts of the Week" offers an overview of important events involving major players in various industries, using BigOne Lab's proprietary data. We have selected the top companies you should pay attention to from the 4,000+ publicly listed companies we track.

In the previous months, we observed the pace of China's economic recovery was falling short of expectations. In light of this, we highlighted the likelihood of upcoming stimulus measures that could potentially be implemented in the following months. We repeatedly emphasized the appeal of Hong Kong and China's onshore equities, drawing attention to the emergence of attractive buying opportunities in the latter half of 2023.

In our latest installment of the "Charts of the Week" series, we specifically emphasized the significance of July's Politburo meeting as a potential market catalyst.

China's economic crossroads: Has sentiments bottomed out? - Charts of the Week

Since the meeting on July 24th, Chinese equities have risen by varying degrees, with the Hang Sang index up by 5%, MCHI (MSCI China) up by 5.6%, and KWEB (China Internet) up by 7% from the level before the meeting as of writing.

The July Politburo meeting re-emphasized the goal of boosting domestic consumption and expanding household income. Specific mentions were made of household items, automobiles, and digital electronics. Some of the aforementioned sectors have yet to start their rebound, as the market currently still trades at a lower level.

Although there may be short-term volatility as the market watches how the stimulus package unfolds, we think this could signal the start of more upside in the second half of 2023. As the market waits for the stimulus measures to be materialized in the upcoming months, it’s important to get a firsthand understanding of which sectors may benefit from the meeting and their current state.

In this post, we will:

• Highlight key signals that were added or re-emphasized in July's Politburo meeting and discuss the implications for the investment environment.

• Answer whether we think now is the bottom of China's equities

• Examine sectors and tickers that are likely to benefit, given the guidelines from July's meeting

Covered in this issue:

• Crucial industry trends to watch in China include the consumer, real estate, internet, and EV maker sectors.

• In-depth data on stocks benefiting from July's meeting:

  • Get a Q2 forecast of key operational metrics for China Internet names:

    • Online sales growth and hiring trends: BABA, JD, Pinduoduo, Douyin, and Kuaishou

    • Pinduoduo's overseas expansion: online sales and growth projections for TEMU

    • Meituan: growth of delivery orders

    • Boss Zhipin: strong platform growth of job postings

  • China NEV’s latest competitive landscape:

    • Rising new players: total number of cars delivered by the top Chinese NEV makers

    • Gauge management confidence: hiring trends of NIO, Xpeng, Li Auto, Tesla, and BYD Auto

  • Coffee Wars: Luckin and Starbucks’s new rivalries

  • Overlooked industry leaders in the home appliances, household goods, and digital electronics sectors:

    • Online sales: Midea (000333.SZ), Haier (600690.SH), Gree (000651.SZ), Xiaomi Corp (1810.HK), Luolai Lifestyle Technology (002293.SZ), Shanghai Shuixing Home Textile (603365.SH), and Shenzhen Fuanna Bedding and Furnishing (002327.SZ)

This post is exclusive to our paid readers. To get a sense of what is offered, you are welcome to check out this older post in the same series:

Charts of Week - China E-comm giants facing new competitions; Industry leaders to watch in April

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Hints at property easing

Compared to the April Politburo meeting, the July meeting added that: