January-February total retail sales grew 2.8% year-over-year, beating expectations! Kweichow Moutai rose over 3%, Consumer ETF (159928) surged over 1% on volume, achieving five consecutive daily gains against market headwinds! Institutions: Early suppressive factors for consumption have shown some reversal.

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Today (3/16), A-shares experienced volatility and declined. The undervalued domestic demand sector regained favor, with the leading consumer ETF (159928) surging over 1% on high volume, hitting five consecutive positive days! During trading, the turnover exceeded 350 million yuan! Funds flowed in again, with a net inflow of over 14 million yuan in the previous trading day. The latest size of the consumer ETF exceeds 22 billion yuan, maintaining its leading position among peers. Among popular constituent stocks, Kweichou Moutai rose over 3%, Beidahuang up over 2%, Wuliangye, Luzhou Laojiao, and Dabeinong each gained over 1%. (Constituent stocks are for display only, not investment recommendations)

Data-wise, China’s retail sales of consumer goods for January-February increased by 2.8% year-on-year, versus an expected 2.5% and a previous 0.9%.

Internationally, geopolitical tensions persist, with international oil prices rising again as multiple countries, including the US and Japan, release strategic petroleum reserves.

Domestically, the “3.15” evening gala exposed seven major issues: bleaching chicken feet with hydrogen peroxide, fake “celebrity” medicines like exosomes, and “poisoned” AI large models, among others. Several involved companies responded or announced rectification measures.

Market outlooks from various institutions indicate that many held spring strategy meetings for 2026. They generally believe that by 2026, the market will shift from liquidity-driven to profit-driven growth, with “tech growth + pro-cyclicality” as the core theme for the year. High-dividend and consumer sectors can serve as stable core holdings, while structural opportunities will be key for investment.

In Hong Kong stocks, the Hong Kong Stock Connect consumer ETF Huaxinfu (159268), focused on genuine new consumption, rebounded nearly 1%, with trading volume exceeding 33 million HKD! During the day, it received a net subscription of 6 million units, with three days of net inflows over the past five days. Most popular constituent stocks are in the green, including Chabaidao (+9%), Bruker (+7%), China Duty Free (+4%), and Mengniu Dairy (+3%). (Constituent stocks are for display only, not investment recommendations)

On the performance front, Chabaidao recently issued a profit forecast, expecting 2025 adjusted net profit between 792 million and 852 million yuan, up 22.79%-32.09% year-on-year; net profit attributable to the parent is expected to grow significantly by 62.50%-75.00% to 780 million-840 million yuan. This growth is attributed to structural optimization of store networks, supply chain efficiency improvements, and refined cost control.

On March 13, Bruker announced its 2025 annual results, with revenue of 2.913 billion yuan, up 30.0%; gross profit of 1.364 billion yuan, up 15.7%; pre-tax profit of 694 million yuan, improving from a loss of 296 million yuan last year; net profit of 634 million yuan, turning profitable from a loss of 398 million yuan in 2024. Adjusted net profit was 675 million yuan, up 15.5%, with an adjusted net profit margin of 23.2%, down from 26.1%. The company stated that revenue growth was mainly driven by a significant increase in sales of role-playing toys, boosting related income.

【Institution: Overall consumption remains optimistic, previous suppression factors are reversing】

Guojin Securities believes that some previous factors suppressing consumption have begun to reverse, but the recovery of endogenous momentum will not happen overnight:

1. Related to real estate: decline in existing mortgage pressures, bottoming out of negative wealth effects from real estate, second-hand housing;

2. Related to policies: in the short term, “old-for-new” programs in 2024-2025 support consumption, but policy intensity will slightly narrow in 2026 (from 300 billion to 250 billion yuan); long-term, policies to optimize social security and increase residents’ income will foster consumption capacity;

3. Related to expectations: corporate profits have bottomed out, with a lag in impact on employment and wages.

The return of RMB funds, wealth effects, and rising price levels and consumption are underway. Since February 2025, bank foreign exchange settlement and sales surplus as a share of GDP ended four years of decline and began to rise steadily. Historically, stabilization and rebound of this indicator often signal CPI YoY recovery and bottoming of retail sales growth, with a lag of less than a year.

The consumer sector is not without opportunities. In 2025, the probability of selected consumer stocks outperforming the CSI 300/Hang Seng Index in A-shares/Hong Kong stocks is 29.5% and 50%, respectively, higher than the market average (29.4%, 11%). Investor pessimism toward consumer stocks may stem from the difficulty in predicting which products, business models, or companies will succeed in this era of “disenchantment.” The birth of new “bull” stocks in consumption seems random, but their commonality is that they have dispelled old brand narratives and allowed consumers to rebuild value judgments in the void.

The term “disenchantment” has become popular on social media in recent years, bringing three changes to consumption:

1. Consumers reject top-down brand storytelling (import halo, social symbols), with established narratives being questioned;

2. The decentralization and penetration of e-commerce platforms have accelerated the breakdown of traditional channel control;

3. Consumers build evaluation systems through personal experience, reinforced by community sharing, greatly reducing advertising influence on cognition.

Guojin Securities notes that while the success of “brands/products” may be unpredictable, one can look for fertile ground for winners and wait patiently with safe valuation margins.

The chart below cross-references “disenchantment possibility” and “market pricing adequacy” to identify undervalued categories amid consumption structural changes. The horizontal axis measures the degree of customer dispersion (inverse of top five customer revenue share, with stronger direct brand-to-consumer links and better self-built reputation systems). The vertical axis measures safety margin (inverse of normalized price-to-sales ratio, with lower ratios indicating more conservative market expectations and larger potential upside). Bubble size reflects the average market cap of stocks within the sector.

(Source: Guojin Securities 20260311 “Return to Reality—Spring 2026 Strategy Outlook”)

【Geopolitical Tensions, What About Domestic Demand?】

China Galaxy Securities believes that recent years have seen increased global trade protectionism, especially rising trade frictions, impacting China’s exports. External demand’s contribution to domestic growth is likely weakening, making it urgent to address insufficient domestic effective demand, which is crucial for stabilizing the economy and promoting long-term development. Consumption, as a key part of domestic demand, is vital for stabilizing the economic fundamentals. By tapping into domestic consumption potential, a more complete internal economic cycle can be built, reducing external shocks. Therefore, boosting consumption is a top priority for expanding domestic demand and strengthening the domestic big cycle.

The important five-year plan emphasizes building a strong domestic market and accelerating the new development pattern. It advocates for expanding domestic demand as a strategic foundation, closely integrating policies to benefit people’s livelihoods, promote consumption, and invest in both goods and people. It aims to lead new supply with new demand, foster a virtuous cycle of consumption, investment, supply, and demand, and achieve higher-level dynamic balance, enhancing the endogenous power and reliability of the domestic big cycle. Efforts include significantly boosting consumption, expanding effective investment, and deepening the construction of a unified national market.

Investing in people will improve social security, healthcare, education, and other public services, directly enhancing residents’ consumption capacity and willingness, benefiting the large consumer industry chain. During this period, with policy support for expanding domestic demand, emerging consumption hotspots will continue to emerge, offering new growth opportunities for the consumer sector.

Long-term, consumption depends on income levels. Since 2010, with ongoing economic restructuring and income distribution reforms, residents’ per capita disposable income as a share of GDP has shown a rising trend, increasing from 40.04% in 2010 to 43.13% in 2024. Meanwhile, the share of final consumption in GDP has generally risen. However, from 2013 to 2019, the growth rates of real per capita disposable income and real per capita consumption expenditure slowed down.

Compared to developed countries, China’s residents’ consumption share remains low. In 2023, China’s final consumption rate was 39.57%, below the global average of 56.40%, with the US at 67.90%, Germany at 49.93%, Japan at 55.50%, India at 60.19%, the UK at 61.28%, and France at 53.36%.

Low social security coverage and residents’ tendency to save for precautionary reasons also constrain consumption. Future reforms to income distribution, social security, and cultivating new consumption scenarios are expected to further unlock domestic consumption potential and inject stronger internal momentum into high-quality economic development.

(Source: China Galaxy Securities 20260314 “Interpretation of the Important Five-Year Plan: Stability with Progress, Seeking ‘New’ and ‘Quality’”)