(Bloomberg) -- Traders are looking to the upcoming Golden Week for fresh catalysts after deepening worries over China’s property sector extended a selloff in the nation’s shares.
Bright spots are already emerging in parts of the consumer sector, with food and travel-related spending rebounding strongly despite the market turmoil. More than 21 million people are expected to travel by planes during the holidays, while retail sales have started picking up.
Investors are hopeful that the eight-day national holiday, which starts Friday, could give the broader economy a further boost after it showed signs of stabilization as Beijing ramps up support. Expectations that the airline, hotel and consumer sectors will benefit from the peak spending season have helped a gauge of consumer discretionary shares chalk up a 1.3% gain this quarter, versus a 4.2% decline in the broader MSCI China Index.
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Consumption figures from the holiday may receive heavier scrutiny this year after a number of Chinese equity gauges fell to their lowest levels since late November. Concerns are mounting about the property sector’s debt troubles and the nation’s recovery and any disappointing spending data could further hit shares.
Golden Week “will be an important gauge on consumer recovery, and the focus will be on the holiday spending” in addition to travel demand, said Marvin Chen, a Bloomberg Intelligence strategist. Still, while the overall market impact may be limited given macro headwinds, “it could be a boost for specific services and entertainment sectors,” he said.
Here are some sectors in focus for market watchers:
The holiday period is poised to ignite a travel boom, with a major railway company posting record single-day sales of 22.9 million tickets, according to Chris Liu, a senior portfolio manager for China A-shares at Invesco. Ticket bookings and prices for domestic trips are expected to hit historical highs, which should benefit airlines such as Air China Ltd.
Online travel agencies such as Trip.com Group Ltd. may also gain from an accelerated recovery in outbound bookings, according to UOB Kay Hian analysts including Julia Pan. Meanwhile, hotel chain operators such as H World Group Ltd. should get a lift.
Retail And Entertainment
Retail sales may rise in October on the back of holiday spending, building on the encouraging signs seen in August’s data. That should bode well for consumer discretionary shares, with ticketing platform Maoyan Entertainment and entertainment firms such China Film Co. being key stocks to watch in the space.
Macau casino operators including Galaxy Entertainment Group Ltd. are also expected to benefit from a surge in mainland Chinese visitors. “The solid hotel room bookings and the unprecedented lineup of events and concerts throughout the week” will boost both gaming and non-gaming revenues, Citigroup Inc. analysts including George Choi wrote in a note.
Developers are counting on the Golden Week to reverse a slump in home sales. While demand remains sluggish amid a recent stream of negative headlines, the traditionally busy season for the industry could still drive a short-term rebound in shares, said Jeremy Yeo, an analyst at SMBC Nikko Securities Inc.
“I would watch if housing sales recover during the busy season, and if they don’t, how much will China relax rules further,” he said.
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