Lockdowns Aren't Preventing Chinese Consumers From Spending

One persistent trend in the United States is that social distancing measures haven’t stopped consumers from spending. That’s certainly the case for the second-largest economy as Chinese consumers are also following that trend amid renewed lockdown measures addressing a rise in COVID-19 cases.

Consumers are flocking online to conduct the majority of their shopping needs, based on the performance of online retailers. That was especially the case for one of China’s online retail giants.

“E-commerce giant Alibaba reported better-than-expected earnings and sales for its most recent quarter Thursday,” CNN reported. “Shares of Alibaba (BABA) were up nearly 15% in late morning trading after the company reported that revenue rose 9% from a year ago, topping analysts’ forecasts. Alibaba said the strength was due to solid online and mobile shopping demand as well as a 12% jump in sales from its massive Alibaba Cloud unit.”

CNN also noted that consumer habits are changing from needs to more essentials in terms of online shopping. However, when lockdowns are lifted, more discretionary spending should take place amid a recovery.

That, of course, is if global inflation doesn’t have something to say about it. There’s already talk in the U.S. of whether too much tightening could spur a recession, but should the central bank (and others that follow) manage to get inflation under control, renewed consumer sentiment could bring rise to more discretionary spending.

Rolling the Dice

Investors looking to roll the dice on future growth can look at the Global X MSCI China Consumer Discretionary ETF (CHIQ). CHIQ’s underlying index “incorporates all eligible securities as per MSCI’s Global Investable Market Index Methodology, including China A, B, and H shares, Red chips, P chips, and foreign listings, among others,” according to Global X.

CHIQ offers investors:

  • Targeted exposure: CHIQ is a targeted play on the consumer discretionary sector in China — the world’s second-largest economy by GDP.
  • ETF efficiency: In a single trade, CHIQ delivers access to dozens of consumer discretionary companies within the MSCI China Index, providing investors with an efficient vehicle to express a sector view on China.
  • All share exposure: The index incorporates all eligible securities as per MSCI’s Global Investable Market Index Methodology, including China A, B, and H shares, red chips, P chips, and foreign listings, among others.

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