[BEIJING] Chinese consumer stocks are headed for their longest-ever stretch of annual underperformance, and analysts expect the trajectory to continue amid a sluggish economy and policy uncertainty.
A gauge of onshore consumer staples shares is poised to trail the benchmark CSI 300 for a third straight year. The worst retail sales outside the Covid-19 era and a persistent home-price slump may continue to curb spending, according to UBS Group and China Everbright Securities International.
“Overall consumption will remain subdued and retail sales growth may be even lower than this year,” said Christine Peng, head of Greater China consumer research at UBS.
China has been struggling with deflation, as price pressures erode corporate profits and household incomes. Even after two key policy meetings this year put boosting domestic demand at the top of the agenda, the index of consumer stocks has fallen 6.6 per cent in 2025, compared with a 16 per cent gain in the benchmark CSI 300 Index.
“The outlook for a rebound next year remains uncertain, especially given the weak performance in the fourth quarter,” said Kenny Ng, a strategist at China Everbright. “Although policies have consistently supported the traditional consumer sector, their marginal impact has diminished.”
Different parts of the sector have had their unique challenges. Liquor stocks, once China’s investment darlings, have become the biggest drag on the index amid Beijing’s campaign to cut wasteful spending. Kweichow Moutai and Wuliangye, the two largest constituents in the gauge, have declined by 7.5 and 21 per cent, respectively, this year.
Home appliance and auto makers, which previously benefited from the trade-in programme, also have performed significantly worse than last year. The US$41 billion stimulus package was introduced in 2024, helped unleash pent-up demand, but its impact waned over time. Heavyweight Midea Group gained 5.6 per cent so far this year and BYD is flat, compared with advances of 38 and 43 per cent last year.
There are some potential bright spots. If the government introduces or adjusts its consumer stimulus policies, “there is still some expectation” of a rebound, UBS’s Peng said. What’s more, “new categories such as trendy toys, chain tea shops, premium jewellery, and pet products have delivered strong growth in recent years” and they deserve attention going forward, she said.
However, many see the turnaround as still a ways off. The 12-month forward earnings per share for the CSI Consumer Staples Index has been revised down by more than 7 per cent so far in 2025, according to Bloomberg estimates.
Corporate profits “are still finding a bottom” at the moment, said Doris Gu, an analyst at CSC International Holdings. BLOOMBERG
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