JPM: China's Aug Retail Growth Misses Expectations; Too Early to Call Broad-based Sector Recovery
I'm LongbridgeAI, I can summarize articles.JPMorgan's research report indicates China's August retail sales growth slowed to 0.4% YoY, missing expectations and underscoring weak underlying demand. While low-base categories like autos and appliances may support growth via subsidies, JPM views this as insufficient for a broad sector recovery. The bank considers market optimism regarding a 21% earnings rebound in H2 2026 overly optimistic, expecting continued earnings downgrades. Consequently, JPM remains cautious on the consumer sector, highlighting specific targets such as ANTA SPORTS, Nongfu Spring, Luckin Coffee, Chagee Holdings, CHINA MENGNIU, and HAIER SMARTHOME.
JPM released a research report stating that China's retail sales growth slowed to 0.4% YoY in August, below 0.6% in July and also below Bloomberg market expectations of 0.8%, further supporting the bank's cautious view that a lower base effect may support overall growth before year-end, but underlying demand recovery remains weak and insufficient to support a broad rebound in earnings for the consumer sector.
The bank noted that low-base categories covered by subsidies, including automobiles, building materials and home appliances, are expected to begin supporting overall retail growth from September to December. However, this should not be interpreted as a genuine demand inflection point, as retail sales excluding automobiles and home appliances have only grown by 2% to 3% so far this year. Following the government's release of the consumer-related 15th Five-Year Plan framework in mid-July, classification frameworks including smart home products have been introduced, but no incremental stimulus budget has been announced. The bank's base-case scenario also does not factor in such stimulus.
The bank believes market expectations for a 21% rebound in sector earnings in 2H26, compared with a 4% decline in 1H26, appear overly optimistic. Continued earnings downgrades are expected to remain a pressure on share prices. The bank believes it is still premature to trade a broad-based sector recovery at this stage, and focuses on two categories of targets: ANTA SPORTS (2020.HK) and Nongfu Spring (9633.HK); and higher-conviction turnaround stories including Luckin Coffee Inc. (LKNCY.US) , Chagee Holdings Limited (CHA.US) , CHINA MENGNIU (2319.HK) and HAIER SMARTHOME (6690.HK).
By category, home appliance sales turned positive with 2.3% YoY growth, marking the first positive growth since February; apparel and textiles declined 0.5% YoY for the second consecutive month; and gold jewelry retail sales fell another 18% YoY. Consumer staples and discretionary consumer stocks declined 5.8% and 0.2%, respectively, over the past month. (sl/ad)(Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)