Investing.com — China’s stock market is living up to the “Casino Royale” moniker, says Bernstein, reflecting the sector’s volatile swings driven by shifting policy expectations and unpredictable market sentiment.
The firm explained in a note Wednesday that optimism about China’s internet sector recently peaked, only to be followed by government press conferences that left investors divided on the trajectory of economic policies.
Bernstein analysts describe the market environment as a rollercoaster of enthusiasm followed by a “steepening drawdown.”
They attribute the rapid sell-off to the lack of clarity on stimulus aimed at boosting consumption. “Air is being let out of a group of stocks where earnings are driven by consumption growth,” they note.
While the Ministry of Finance’s statement on fiscal flexibility is seen as a positive, the analysts warn that unless tangible consumer stimulus materializes, the rally may lose steam.
Looking ahead, Bernstein expects modest growth in 2025, forecasting 5% retail consumption growth and 8% growth in e-commerce GMV.
However, they caution that market expectations—particularly the 9-10% GMV growth some anticipate—may leave “limited room for error,” even if platforms like Douyin manage to expand by 20-25%.
Valuations across the sector remain volatile, says Bernstein, acknowledging that its prior call to “buy low, sell high” now seems “accidentally prescient.”
However, they caution that stocks are still within 10-15% of “buy-the-dip territory.” The analysts believe higher floors for 2025 PE multiples may emerge if policymakers become more proactive.
Bernstein’s top picks include Meituan for its expected ad growth, Tencent for its long growth runway, and PDD for earnings driven by domestic share gains and Temu’s expansion. While JD (NASDAQ:) is seen as better positioned to benefit from stimulus, Alibaba (NYSE:)’s exposure is viewed less favorably.
