BEIJING – JPMorgan is calling the bottom of a slump for Chinese consumers, and the company says it’s now time to buy. Chinese consumers have been reluctant to spend since the Covid-19 pandemic. Retail sales increased just 3.5% last year, less than half of the 2015-2019 average. However, on March 26, JPMorgan’s Chinese equity strategist upgraded consumer discretionary stocks from neutral to overweight. Tariffs and tensions with the US can be dental emotions, but strategists hope Beijing could enhance consumer stimulation following high-level policy calls. In the meantime, “Our analysis shows that China’s business cycle for consumption is at its bottom,” JP Morgan’s chief Asia and Chinese equity strategist Wendy Liu and his team said in the report. They pointed to drivers such as recent trade-in policies, stabilizing stock prices, and alleviating deflationary pressures due to basic effects. The latest revenues for Chinese companies show a recovery in consumer spending, although still far from pre-pandemic levels, except for a few niche categories such as gold and popular toys. JPMorgan analysts expect China’s stocks could rise in the coming weeks as revenue growth and forecasts rise above forecasts. Their Chinese consumer stocks focus on subsectors with basic improvements and reasonable valuations. According to JPMorgan, their consumer plays are: ANTA SPORT – The Hong Kong-listed sports brand reported better retail sales than expected in February, reporting that it is less necessary to discount products. Anta owns the rights to the Italian Chinese brand FILA. Mengniu – Jpmorgan expects the Hong Kong-listed Chinese dairy giant will likely benefit from China’s efforts to boost fertility rates. Mengniu is headquartered in Hohhot, the capital of Mongolia, which announced a grant of up to 100,000 yuan per child this month. However, the company reported revenues for 2024 fell 10.1% in the face of a “strengthened price competition,” according to an annual report released Wednesday. China Resources Beer – Earlier this month, a Hong Kong-listed seller in China’s Heineken reported that premium beer sales rose nearly 20% in 2024 despite high bases the previous year. JPMorgan noted that CR Beer’s management reported a pick-up of consumer sentiment in the first two months of 2025, and is confident that it will bring strong revenue growth in the year ahead of 2024. TALEDUCATION – The listed Chinese education companies in the US are currently operating at a loss, but their margins are being sold significantly over the next two years on educational devices exclusively for artificial intelligence. The company said in January that AI learning devices are one of the “faster business lines to grow.” JPMorgan’s report warned that official measures of consumer confidence have stabilized after a plunge in 2022, but remained below about 30 points for the 2018-2021 period. China’s retail sales increased 4% year-on-year in the January-February period, increasing hope for future improvements. Chinese stocks were pulled back, and the Hangsen index fell more than 1% last week as potential new rounds of US tariffs loomed in early April. However, in the past few days, major investment companies such as Goldman Sachs have noted that investors’ profits in Chinese stocks have reached their highest since their early 2021 peak. The index tracks Chinese companies trading in Hong Kong and the US mainland. Strategists have upgraded China’s views on health stocks from neutral to overweight, considering that AI could help biotech companies reduce costs. However, concerns about overpower and soft real estate-related construction demand have downgraded China’s industrial stocks from overweight to neutral. – CNBC’s Michael Bloom contributed to this report.
