A Stock Trader’s Guide to China’s New Year Holiday Week

(Bloomberg) – China heads into its Lunar New Year holiday next week with investors on the lookout for anything that could help lift the country’s stocks from a bear market rout.

The 20% fall in the benchmark CSI 300 from its peak a year ago showed that it will take more than the central bank’s pivot to monetary easing to revive confidence.

The week-long break offers traders a key opportunity to gauge any improvement in consumer sentiment, as hundreds of millions of people travel to see family and friends, attend reunion banquets and focus on Hobbies.

While the celebrations are likely to be much more subdued than before the pandemic, the money spent during the week can tell investors a lot about the outlook for a host of sectors and individual stocks.

Read more: China holiday travel slowly recovers as Omicron spreads

Here are some key areas to watch:

Travel

Authorities have pledged to tailor virus controls to local conditions in different regions and the National Development and Reform Commission has said it wants to “unleash the potential for consumption” during the festival season.

Any rise should spill over to the CSI All Share Hotels, Restaurants and Leisure Index, and companies such as Shanghai Jinjiang International Hotels Co. (-4% YTD) and Utour Group Co. (+22% YTD). Shares of Shanghai International Airport Co. (+8.1% YTD) and Guilin Tourism Co. (+10% YTD) rose on the last trading day before the holiday amid bets on increased travel.

Ticket figures by travel booking platforms such as Alibaba Group Holding Ltd.’s Feizhu. and Tongcheng Travel Holdings Ltd. (+9.3% since the beginning of the year) can also provide information to supplement the official data. China expects the number of passenger trips made during the upcoming holidays and until February 25 to increase by 36% compared to 2021, although this is still 60% below pre-covid levels.

To eat

Banquets in restaurants are expected to be fewer and more modest than in previous years, but growth is expected for take-out orders and ready meals.

Packaged food makers such as Zhanjiang Guolian Aquatic Products Co. (+37% YTD) and Guangzhou Restaurant Group Co. (-7.2% YTD) should benefit. The CSI 300 Consumer Staples sub-gauge remains down 30% from last year’s high, shares of distillers like Kweichow Moutai Co. (-8% YTD) and Wuliangye Yibin Co. (-11% YTD) falling again.

Tsingtao Brewery Co. (-6.9% year-to-date in China) could be one of the main beneficiaries of the increase in travel given the “large population of migrant workers from Shangdong province “Sanford C Bernstein analysts, including Euan McLeish, wrote in a note. They also cited a 16% increase this year in the use of the restaurant app Dianping as a positive sign.

Entertainment

The holidays are also known as China’s peak movie season, when many of the year’s top-grossing films are screened, providing an early indication of box office earnings in the coming quarters.

Look at the CSI All Share Media Index and the CSI All Share Leisure Equipment & Products Index, which includes game publishers Kunlun Tech Co. (-19% YTD), Oriental Pearl Group Co. (-12% YTD) and film companies like China Film Co. (-3.4% YTD), Mango Excellent Media Co. (-39% YTD) and Beijing Enlight Media Co. (-18% since the beginning of the year)

Investors are watching to see if box office revenue can top the 7.8 billion yuan ($1.2 billion) record set during the holiday last year.

Retail

Official retail spending figures released at the end of the holiday week will also be watched to gauge the pace of the recovery.

Traders are also interested in winter leisure spending, which could be boosted given that the holiday coincides with the Beijing Winter Olympics. Sales of ski equipment have doubled on some e-commerce platforms, according to the government. Stocks that could see a rise include sports equipment maker Toread Holdings Group Co. (-14% year-to-date) and Fujian Snowman Co. (-32% year-to-date).

E-commerce will be an area to watch for individual businesses, as well as the generosity of consumers to donate electronic versions of traditional red envelopes.

Regulators

Investors will also keep a close eye on any state media reports suggesting loosened or tighter regulations in hard-hit sectors like real estate and big tech.

Positive signals have recently come from Anhui provincial planners mentioning the reduction of housing installments. But these are only baby steps and the lack of interest from developers in local land sales means the stress lingers.

©2022 Bloomberg LP

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