(Bloomberg) -- Traders hammered by China’s stock rout are looking for fresh market signals from one of the country’s peak consumer-spending seasons.
The Lunar New Year holidays, running from Feb. 9-17 this year, will have investors scouring spending data like travel and box-office receipts for signs about the health of the world’s second-largest economy. Expectations are soft this year, with analysts saying consumers are likely to tighten their belt given the bleak economic outlook. Also, prior-year comparisons may set a high bar, as 12 months ago the economy was rebounding strongly from Covid shutdowns.
Chinese shares are some of the worst performers globally this year as weak economic data, simmering geopolitical tensions and a worsening property crisis weigh on investor sentiment. Many market watchers don’t yet see authorities’ steps to stabilize markets as sufficient. Underwhelming holiday spending may deepen the market’s gloom, while surprise strength may bolster related shares.
Here are holiday-linked sectors that investors are watching:
Domestic travel demand will likely be strong during the Lunar New Year holidays, with officials expecting a record nine billion trips to be made over the holiday period as millions of workers head back to hometowns to spend time with their families.
Destinations with snow and ice activities in northern China, such as Harbin, or with warm weather in southern China, such as Hainan and Yunan, have been among the top domestic destinations, Citigroup Inc. analysts including Lydia Ling wrote in a note. Major beneficiaries include H World Group Ltd. and China Tourism Group Duty Free Corp.
Outbound travel is also expected to rise thanks to flight-capacity increases, resumption of group tours and favorable visa policies, though the recovery will likely be mild given more Chinese customers are opting for “value for money” when choosing travel products amid the weak macro and evolving travel patterns, they added.
Spending budgets for the upcoming holiday season may only marginally increase, with any improvement in demand for alcoholic beverages and sportswear seen as temporary.
“Such spending growth could be only festival-driven as consumers are still concerned about the macro outlook and job security,” Morgan Stanley analysts including Lillian Lou wrote in a note.
That could mean industry behemoths like Kweichow Moutai Co. and Li Ning Co. get only a limited boost.
“The discounting and promotions across many consumer categories is pretty severe,” said Jeremy Yeo, an analyst at SMBC Nikko Securities Inc. “It is hard to get too excited on fundamentals until we get a clearer sign that the government is willing to do a lot more to fight deflation.”
Box-office ticketing will also be a key measure. Morgan Stanley analysts including Rebecca Xu see a modest 2% year-on-year growth for the Lunar New Year — mainly due to a lackluster pipeline, even as movie-going demand remains robust. Shares to watch include ticketing platform Maoyan Entertainment and movie makers such as China Film Co., Wanda Film Holding Co., and Huayi Brothers Media Corp.
The casino city of Macau may see a huge influx of mainland visitors during the holiday period, benefitting operators such MGM China Holdings Ltd., according to JPMorgan Chase & Co. analysts including DS Kim.
“Our checks indicate a very healthy level of gaming patrons pre-booked for comped rooms,” they wrote. The analyst expect a 120% recovery in mass gross gaming revenue versus the Lunar New Year holidays in 2019.
--With assistance from Jing Jin.