The return of Trump has left China with no policy options but one path—reflation, which includes asset reflation and price reflation.
For China's economic growth, there are only two real drivers: leveraging and strong external demand. These are the fundamental sources of demand creation.
Next year, external demand itself will weaken marginally. If Trump wields the tariff stick again, China will have to focus on internal reforms. Moreover, demand stimulation must target end-user demand, not intermediate investment demand.
Over the past two years, Chinese assets have remained undervalued with high dividends. In 2025, cyclical and tech-upgrading sectors are likely to present opportunities (refer to the 2018 trade war).
The path is singular and clear, making the game simple. Next year, the focus will likely be on cyclical sectors, especially in trading terms—front-loading policy expectations and back-loading implementation effects.
The policy game has already begun today. In terms of timing, consumer goods, especially service-related consumption, must lead the cyclical upturn, as service consumption holds greater potential in China's domestic demand.
Moreover, the results of the 8th meeting will soon be released, followed by the Central Economic Work Conference at year-end. Thus, consumer sectors are poised for an initial rally. With valuations at low levels, Dolphin Research believes now is the window to position in cyclical sectors, recommending focus on consumer sectors with solid fundamentals and low valuations. $YUM China(YUMC.US) $NONGFU SPRING(09633.HK) $TSINGTAO BREW(00168.HK) $HAIDILAO(06862.HK) $CHINA RES BEER(00291.HK) $ANTA SPORTS(02020.HK)
Note that these overseas assets are purely listed in Hong Kong.
Internet consumer stocks, mostly listed in the U.S. with higher U.S. capital weightings, face concerns about becoming part of the U.S.-China play. Thus, they need to digest negative sentiment first, but opportunities may emerge afterward.
