20221010-招银国际-Cross_sector_report_Post-Golden_Week__More_positive_on_BToC_recovery_potential__Cautious_on_BToB_10页_1021kb

Summary of Cross Sector Report

Core Content

This report analyzes the performance and outlook of various sectors in China during and after the National Day Golden Week, focusing on the recovery potential of B2C (Business-to-Consumer) and B2B (Business-to-Business) industries. It highlights the impact of the pandemic resurgence, policy support, and the 20th National Congress meeting on market sentiment and investment strategies.

Main Points

• B2C Recovery Potential: The report suggests a more positive outlook for B2C recovery, particularly in consumption and consumer internet sectors, while being cautious about B2B due to its vulnerability in the weak macroeconomic environment.
• Pandemic Impact: The resurgence of the pandemic has significantly dampened consumer and business activity, especially in travel and retail.
• Investor Strategy: Due to market volatility and uncertainty, the report recommends avoiding one-sided long or short positions and instead focusing on pair trade opportunities, specifically long B2C and short B2B.
• Sector Analysis:
  • Property Sales: Despite 930 stimulus measures, property sales in major cities fell by 42% YoY during Golden Week, indicating weak demand. The recovery is expected to be bumpy with limited policy support and financing constraints.
  • Auto Sales: The Golden Week was unexciting, but the pre-buying effect before tax cuts and subsidies phase-out suggests a weak start followed by sequential improvement in 4Q22.
  • Domestic Tourism: Recovery was weak, with tourism volume and spending only reaching 61% and 44% of 2019 levels, respectively. Short-haul travel dominated, and the offline entertainment sector, particularly movies, suffered significantly.
  • Consumer Internet: B2C companies like Meituan, Pinduoduo, and JD.com are expected to benefit from easing pandemic conditions and improved consumption sentiment.

Key Information

Property Sales

• Declined by 42% YoY in major 30 cities during Golden Week, worse than the 19% and 14% declines in August and September.
• Policy support is only 60% of that in 2015, and the leading indicator suggests continued weak performance in October.
• Property loans may decline by 25% YoY in 4Q22, with more support going to SOEs than POEs.
• Offshore debt repayment peak is expected in January.

Auto Sales

• Golden Week saw weak performance, with retail sales volume rising only 13% YoY in October.
• Pre-buying before tax cuts and subsidies phase-out may have affected the Golden Week results.
• Tesla and Li Auto showed better performance, while NIO had strong order backlog for ET5.
• Xpeng's new model G9 may not meet expectations due to customer dissatisfaction.
• BMW and Mercedes-Benz also reported below expectations, but higher incentives in 4Q22 may help sales.

Domestic Tourism

• Tourism volume dropped 18% YoY to 422mn, reaching 61% of 2019 levels.
• Tourism spending fell 26% YoY to RMB287.2bn, only 44% of 2019 levels.
• Local travel accounted for 65% of total bookings, with increased spending per tourist.
• Offline entertainment, especially the movie market, was severely impacted, with box office revenue down 66% YoY.

Consumption and Consumer Internet

• Local consumption saw solid GTV growth, with Meituan reporting a 34-52% increase compared to previous holidays.
• Catering sales improved compared to September and Mid-Autumn festival.
• Home appliances showed resilience in small appliances, while large appliances faced margin pressure.
• Online entertainment (gaming) outperformed offline due to continued engagement despite pandemic restrictions.

Macro and Market Volatility

• Pandemic resurgence and the 20th National Congress meeting are expected to increase market volatility.
• Historical data shows the SHCOMP index tends to decline during the CPC meeting period.
• Weak macroeconomic conditions and uncertain policy support contribute to the overall cautious outlook.

Investment Recommendations

• Avoid one-sided positions: Due to the weak macroeconomic environment and market volatility, investors should avoid long or short positions in either B2C or B2B sectors.
• Focus on pair trading: Long B2C companies and short B2B companies to play the difference in recovery potential.
• Sector-specific outlook:
  • Outperform: Catering and consumer internet (Meituan, Pinduoduo, JD.com).
  • Neutral: Home appliances (small appliances outperform), sportswear, and apparel.
  • Underperform: Property and B2B sectors, which are more vulnerable to economic downturns and policy limitations.

Analyst Certification & Ratings

• The report is certified by the lead analyst, who confirms no conflicts of interest.
• CMBIGM provides ratings for stocks and industries:
  • BUY: Potential return of over 15% over next 12 months.
  • HOLD: Potential return of +15% to -10% over next 12 months.
  • SELL: Potential loss of over 10% over next 12 months.
  • NOT RATED: Not rated.
  • OUTPERFORM: Industry expected to outperform the market.
  • MARKET-PERFORM: Industry expected to perform in line with the market.
  • UNDERPERFORM: Industry expected to underperform the market.

Disclaimer

• The report is for informational purposes only and not investment advice.
• No liability is accepted for any loss or damage resulting from reliance on the information.
• The report is subject to change and may not reflect the latest market conditions.
• CMBIGM is not a registered broker-dealer in the U.S., and the report is distributed only to major U.S. institutional investors.
• In Singapore, the report is distributed by CMBISG, an exempt financial adviser, and may be provided to certain investors only.