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UBS: CN Consumption to Maintain 'K-Shaped' Recovery This Yr; Mkt Still Underestimates Reflation Potential; Sector Top Picks Listed
Recommend 3 Positive 5 Negative 11 |
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UBS Investment Bank expected rising reflation expectations in 2H to become a key catalyst for China’s consumer sector, particularly in staples, Christine Peng, Head of Greater China Consumer Research, UBS Investment Bank, wrote. This view was based on rising upstream costs and improving supply-demand dynamics, which have yet to be fully reflected in current share prices. The bank noted that China’s April PPI accelerated to 2.8% YoY, mainly propelled by a rapid rise in energy prices, while CPI grew 1.2% YoY, dented by weak pork prices. If hog prices rebound and remain elevated in 2H, and if high energy costs are partially passed through downstream, CPI is expected to drift higher. UBS believed consumption will continue to show a "K-shaped" recovery in 2026, mainly motivated by: (1) wealth effects from a stabilizing property market and rising equity market; and (2) earnings growth of industrial enterprises. The bank observed that faster inventory destocking (such as in baijiu), channel diversification, capacity reduction (in hog farming and dairy), and industry consolidation over the past two quarters helped strengthen pricing power and protect margins. The market still underestimates reflation potential, which could be evidenced by early price hikes by some companies and a potential rebound in hog prices in 2H. UBS’s top picks in China’s consumer sector are MUYUAN (02714.HK), KWEICHOW MOUTAI (600519.SH), YILI (600887.SH), EASTROC (09980.HK), GUMING (01364.HK), YUM CHINA (09987.HK), HAIDILAO (06862.HK), CHINA RES BEER (00291.HK), ANKER (300866.SZ), ANTA SPORTS (02020.HK), LAOPU GOLD (06181.HK) and MNSO (09896.HK). The least preferred are SWELLFUN (600779.SH) and YONGHUI SUPERSTORES (601933.SH). AASTOCKS Financial News |
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