The upcoming eight day National Day holiday in China, coupled with recent stimulus measures targeting the service industry, is expected to boost consumption among Chinese residents and boost the popularity of consumer stocks.
According to Bloomberg on Tuesday (September 30th), millions of people will travel, shop, and dine during the holiday starting from October 1st. Their expenditure data can provide answers to questions such as whether deflationary pressure has eased and whether policy support is being translated into real economic activity.
To encourage consumption, municipal governments are distributing coupons, mainly targeting cars, restaurants, and tourism. The central government has also issued stimulus measures for the service industry, including extending museum opening hours and hosting more sports events.
According to reports, efforts to transform China's economy, which relies heavily on industry, into a consumer and service sector will be reflected in holiday consumption, especially this year's National Day holiday, which has one more day than last year. Strong data may bring new upward momentum to consumer stocks. Since the beginning of this year, consumer stocks have fallen by 3.3%, lagging behind the 16% increase in the Shanghai and Shenzhen 300 Index.
Bloomberg industry research analyst Catherine Lim and others pointed out in a report that China's economic focus is shifting towards consumption led by the service industry, which is in line with the growing demand for experience, health, and cost-effectiveness among consumers. The report continues to indicate that even if the economic outlook remains bleak, consumption may still rise.
But analysts also warn that the pursuit of low prices and fierce competition may limit the economic impact of this holiday. Analysts from HSBC Qianhai Securities predict that holiday foot traffic and consumption frequency will increase, but per capita spending and average prices will remain sluggish.
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