Chinese stocks end week higher on hopes of more consumption stimulus

SHANGHAI: Chinese stocks ended the week higher on Friday, led by consumer shares, after a northern Chinese city announced plans to boost birth rates, while investors await a press conference next week for additional measures to enhance domestic consumption.

China’s blue-chip CSI300 Index closed up 2.4%, while the Shanghai Composite Index rose 1.8%. Hong Kong benchmark Hang Seng was up 2.1%.

Hohhot, a city in northern China’s Inner Mongolia, said on Thursday that it would offer cash subsidies to couples having children, in the latest effort to boost the country’s birth rates, according to state media. Investors expect more cities and provinces may follow suit.

Consumer staples shares surged 3.9%, with milk giant Yili up 8.6%. Mengniu Dairy jumped 9.0% in Hong Kong.

Liquor shares also rose, with the iconic blue-chip Moutai up 5.9%.

UBS Strategist James Wang switched the most preferred sector in China from internet to consumer stocks, citing cheaper valuations and a clear policy tilt towards consumption at the recently concluded National People’s Congress meeting.

With government policy increasingly favouring consumption, there is potential for onshore shares to catch up with offshore shares traded in Hong Kong, said Wang, adding that onshore shares generally have a higher representation of consumer stocks, approximately 20% of the CSI 300 Index.

For the week, the CSI 300 index gained 1.6% and the Hang Seng index was down 1.1%.

China’s financial regulator urged institutions to boost support for consumption, promising in a statement on Friday to relax consumer credit quotas and loan terms, as it offers long-term backing to make available large sums.

Meanwhile, market participants are awaiting a press conference on Monday for more details on measures to boost consumption in China.