Daily Brief Thematic (Sector/Industry): China Consumer Discretionary: Reducing The Underweight and more

In today’s briefing:

China Consumer Discretionary: Reducing The Underweight

Active China funds are rotating back in to the Consumer Discretionary sector. Holding weights bottomed out in early 2022, with an increasing number of managers re-positioning themselves as overweight
Large increases in ownership across key stocks underpin the sector rotation. Pinduoduo saw an +8.4% increase in the percentage of funds invested, Trip.com Group +6.7% and NIO Inc +5.88%
If the rhetoric is that China is oversold here, then Consumer Discretionary stocks appears well placed to benefit from further inflows.

Beijing-based Sinosteel Corp. was restructured and merged into China Baowu Steel Group Corp. Ltd.
Baowu Steel Group took Sinosteel into its stewardship in October 2020 as the SASAC-owned company ran into debt trouble.
Formed after the reorganization of the former Baosteel and Wuhan Iron and Steel in 2016, China Baowu has carried out a series of strategic mergers and restructurings in recent years, becoming the world’s largest steelmaker.

Sunny Optical (2382 HK) and Largan Precision (3008 TT) dominate the compact lens module market, but analysis of data from technical publications suggests very different strategies.
After lagging Largan significantly till 2016, Sunny Optical now leads in number of innovations, though the impact and quality of the innovations still materially lags Largan
Besides overcapacity the primary risk for the industry is whether at some some stage the benefits of “next-gen” lens modules fall below the “Noticeable Difference” threshold.

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