(Bloomberg) -- China is heading into its Lunar New Year holiday next week with investors on the lookout for anything to help pull the country’s shares out of a bear-market rout.
The benchmark CSI 300 Index’s 20% slump from its peak a year ago has shown that it will take more than the central bank’s pivot to monetary easing to rekindle confidence.
The week-long break provides a key opportunity for traders to gauge any improvement in consumer sentiment, as hundreds of millions of people travel to see family and friends, join reunion banquets and turn their focus from work to recreation.
While celebrations are likely to be much more subdued than those before the pandemic, the money spent over the week can tell investors a lot about the outlook for a host of sectors and individual stocks.
Read more: Chinese Holiday Travel Makes a Slow Recovery as Omicron Spreads
Here are some key areas to watch:
Authorities have pledged to tailor virus controls to local conditions in different areas and the National Development and Reform Commission has said it wants to “unleash consumption potential” during the festival season.
Any uptick should flow through to the CSI All Share Hotels, Restaurants and Leisure Index, and companies including 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 that travel will increase.
Ticket figures by travel booking platforms such as Alibaba Group Holding Ltd.’s Feizhu and Tongcheng Travel Holdings Ltd. (+9.3% YTD) may also offer insight to complement the official data. China projects the number of passenger trips made during the upcoming holiday and through until Feb. 25 to increase by 36% from 2021, though that’s still 60% lower than pre-covid levels.
Restaurant banquets are expected to be fewer and more modest than previous years, but growth is anticipated in take-out orders and pre-made meals.
Packaged food makers such as Zhanjiang Guolian Aquatic Products Co. (+37% YTD) and Guangzhou Restaurant Group Co. (-7.2% YTD) stand to benefit. The CSI 300 Consumer Staples sub-gauge remains 30% down from last year’s peak, with shares in distillers like Kweichow Moutai Co. (-8% YTD) and Wuliangye Yibin Co. (-11% YTD) falling again.
Tsingtao Brewery Co. (-6.9% YTD in China) may be a top beneficiary of increased travel given the “significant population of migrant workers who originate from Shangdong” province, Sanford C Bernstein analysts including Euan McLeish wrote in a note. They also cited a 16% surge this year in usage of the dining app Dianping as a positive sign.
The holiday is also known as China’s peak movie-going season, when many of the year’s top-grossing films are shown, providing an early indication of box office revenue over the quarters ahead.
Watch the CSI All Share Media Index and CSI All Share Leisure Equipment & Products Index, which include game publishers Kunlun Tech Co. (-19% YTD), Oriental Pearl Group Co. (-12% YTD) and movie companies like China Film Co. (-3.4% YTD), Mango Excellent Media Co. (-39% YTD) and Beijing Enlight Media Co. (-18% YTD)
Investors are watching to see if box office revenue can pass the record 7.8 billion yuan ($1.2 billion) set during the holiday last year.
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 see a boost given that the holiday overlaps with the Beijing Winter Olympics. Sales of ski equipment has doubled on some e-commerce platforms, according to the government. Stocks that could get a bump include sports equipment maker Toread Holdings Group Co. (-14% YTD) and Fujian Snowman Co. (-32% YTD).
E-commerce will be an area to watch for individual companies, as well as for how generous consumers are in giving the electronic versions of traditional red packet money envelopes.
Investors will also keep a careful eye out for any state media reports that suggest a softening or tightening of regulation in hard-hit sectors like property and big tech.
Positive signals recently came from provincial planners in Anhui mentioning lowering of housing down payments. But these are just baby steps and the absence of developer interest in local land sales means the stress persists.
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