Chinese Stocks Poised for Strong Open as Travel and Tourism Data Boost Market Confidence
Chinese stocks are expected to have a strong start after the Lunar New Year break, thanks to positive travel and tourism data that has boosted market confidence. While trading in mainland China was closed from February 9 to 16, offshore shares saw gains, indicating room for onshore shares to catch up. This comes as a relief for one of the world’s worst-performing major markets.
The Lunar New Year holiday provided insights into consumer spending patterns, suggesting an increase in consumption despite the challenges faced by the broader economy, such as deflation and a property crisis. Market watchers anticipate that this stream of positive data will give equities a short-term boost and help revive investor confidence.
One of the key factors contributing to this optimism is the performance of services-related industries during the holiday. Linda Lam, head of equity advisory for North Asia at Union Bancaire Privee, stated, “The early read from Lunar New Year data, from holiday hotel sales to Macau visit numbers, points to bright spots in services-related industries.” She also mentioned that Chinese stocks traded on the mainland, known as A-shares, are expected to open on a stronger note with continued share price recovery supported by the state.
Several Chinese stocks in Hong Kong experienced surges in response to the holiday data. Rail trips saw a 61% gain compared to the previous year, online hotel bookings and spending on delivery giant Meituan also saw significant increases. Macau reported over 1 million visitors during the first six days of the holiday, the highest since 2017. Mainland tourists accounted for 77% of the total.
China Tourism Group Duty Free and travel platform Trip.com Group were among the stocks that gained in Hong Kong post-holiday sessions. Meituan and e-commerce player JD.com also experienced significant increases. Options data suggest that traders are becoming more bullish, with the Hang Seng China Enterprises Index’s 25 delta skew favoring calls for contracts expiring in March.
The Chinese government has been taking measures to stabilize the equities market ahead of the holiday. State funds increased purchases, regulatory tweaks were implemented to reduce selling pressure, and there was a surprise replacement of the securities regulator chief. These moves helped the benchmark CSI 300 Index rebound from a five-year low and climb 5.8% in the week before the holidays.
The continuation of this rally is crucial for the world’s second-largest market, which has fallen out of favor with investors due to geopolitical tensions and Beijing’s control over the private sector. Global money managers have been opting out of Chinese stocks, and shorting Chinese stocks has become a popular trade. However, traders are hopeful for further policy support across the monetary and fiscal space, as well as a cut in the reserve requirement ratio. Any signs of stimulus ahead of the annual meetings in March will be closely watched.
While there is optimism for a short-term rebound, doubts remain about the market’s long-term prospects. The CSI 300 gauge has lost over 40% of its value since its peak in 2021 due to Covid controls, regulatory crackdowns, an uneven economic recovery, and geopolitical tensions. A Bank of America survey revealed that shorting Chinese stocks is becoming more popular among global money managers. However, if there is more aggressive fiscal policy to boost the real estate sector, a third of the respondents said they would increase their allocation to Chinese stocks.
“In the short term, national team buying will still be the key factor that supports the Chinese market,” said Daisy Li, fund manager at EFG Asset Management. “In the next three to six months, it will depend on what target China sets for economic growth and budget deficit for this year.”
Overall, the positive travel and tourism data during the Lunar New Year holiday has provided a much-needed boost to Chinese stocks. While short-term gains are expected, the market’s long-term prospects remain uncertain. Investors will closely monitor policy support and economic targets set by the Chinese government in the coming months.