Signs of recovery in Chinese hot pot, bubble tea and luxury sectors


Chinese residents wearing raincoats and tasting hotpot as thousands of people gather during a hotpot festival in southwest China’s Chongqing Municipality October 31, 2009.

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Signs of recovery could emerge in China’s luxury and consumer discretionary sectors, a Bank of America analyst said, even as China released data showing consumer inflation was at an all-time low for 18 months.

“When it comes to high-end luxury [consumption] – we are seeing a pretty strong recovery,” said the bank’s chief China equity strategist, Winnie Wu. “On the low end, bubble tea, Shabu Shabu, those hotpots – we are seeing a good recovery .

Haidilao Chinese hot pot chain jumped nearly 80% in revenue for the financial year ended December 31, 2022 compared to the previous year.

The Chinese luxury market fell by 10% in 2022, down for the first time in five years, according to Bain & Company. However, the consultancy expects “growth to resume in 2023 after China recovers from the most recent impacts of Covid-19”.

“We expect positive conditions to return before the end of the first quarter,” the February report said.

Wu, however, argued that a good overall recovery in China’s consumer sector was not yet visible.

“So far we’re seeing mixed signals. Retail sales aren’t good enough,” she said.

China’s consumer price index for March rose 0.7% year-on-year, China’s National Bureau of Statistics announced on Tuesday. The reading fell short of Reuters expectations for a 1% rise and continues to hover at the lowest levels since September 2021.

In a report following the release of China’s CPI data, Goldman Sachs said China’s headline CPI is expected to “accelerate slightly” in the coming months, boosted by an economic rebound.

However, the US investment bank noted that the reading is expected to remain “well below the PBOC’s 3% target.”

The real estate sector, a ray of hope?

Wu expects to continue to see “mixed signals” for China’s April-June CPI readings. But one area that could give market watchers more confidence is the real estate sector where there’s “a continued recovery in primary home sales, new home sales,” she told CNBC.

“If the real estate market can continue to show a strong recovery, I think that could give people an earlier indication that we are in for a good year of general economic recovery,” she said.

However, while there is the growing feeling that people in China want to buy houses again, Wu pointed out that the rebound in the property market may not happen as quickly as hoped.

“Big items, car sales, property sales – they will naturally come later because right after a lockdown, right after [recovering] of Covid, the first thing you buy is not the house.”

“Thus, the real estate sector [rebound] will naturally come later, and I say, let’s give it more time.”

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