The NPC & CPPCC meetings of the PRC (“two sessions”) are scheduled to kick off on 22 & 21 May respectively. We preview potential policies, from fiscal, monetary to targeted stimuli. We expect consumer stocks would emerge as winners, supported by policies as well as historical data. Capital goods is another sector expected to outperform.
- Broad consumption support & targeted investment boost. Monetary easing and fiscal stimuli have been frontloaded before the “two sessions” to mitigate negative impacts of the COVID-19. However, there are still plans that haven’t been specified yet, such as the annual goal of achievements, the magnitude of fiscal stimuli, and stepped-up measures to support SMEs and most affected populations, etc. These could be market focus during the two sessions. We expect the government will continue beefing up demand and consumption support, which could be broad-based, while investment boost and employment support would be more targeted.
- Consumer sectors may again be the winner this year. With the pandemic and US-China relations currently the key swing factors on the broad market, we may focus on two sessions' impact on sectors’ relative performance. Historical data suggest that consumer sectors tended to outperform around the two sessions, and we expect the same this year having considered policy support and external risks. Consumer stocks that may outperform include retail, catering, auto, education, e-commerce, etc.
- Capital goods: Infrastructure spending will continue to be the key measure to support the economy. Expect approval of more projects following the two sessions. We see upside in demand for construction machinery and heavy-duty truck in 2H20E.
