uploads///Mutual Funds Exposure to the Consumer Discretionary Sector

Westpac MNI Consumer Sentiment Indicator for China Up in September

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Dec. 4 2020, Updated 10:52 a.m. ET

Westpac MNI Consumer Sentiment Indicator

The Westpac MNI China Consumer Sentiment Indicator (or CSI) rose 1.5% to 118.2 in September—the highest level since May 2014—from 116.5 in August. This indicates that Chinese consumers are positive about their country’s economy. Due to the stock market meltdown in August and the slow growth in economic indicators, a rise in the CSI is surprising.

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Westpac MNI China CSI is made up of five major subindicators:

  • durable buying conditions
  • current business conditions indicators
  • stock investment indicators
  • real estate investment indicators
  • car purchase indicators.

MNI Indicators’ chief economist Philip Uglow noted, “Our cross-section of urban Chinese consumers seems oblivious to the tirade of negativity that surrounds China at the moment. Instead, consumer sentiment is at the highest in almost one and a half years, which is a boon for an already firm retail sector. While China’s traditional industrial growth engine is slowing, the growing consumer and service sector should help to underpin growth in the months and years ahead.”

Impact on mutual funds

The above chart shows that the Clough China Fund – Class A (CHNAX), the Fidelity China Region Fund – Class C (FHKCX), and the Matthews China Fund – Investor Class (MCHFX) have more than 10% exposure to the consumer discretionary sector. However, the John Hancock Greater China Opportunities Fund – Class A (JCOAX) has ~6% exposure to the consumer discretionary sector. A rise in consumer sentiment could be positive for consumer discretionary companies. In turn, this would help mutual funds with a sizable exposure to stocks from this sector.

An improvement in consumer sentiment is an advantage for consumer discretionary companies. American depositary receipts (ADRs) of consumer discretionary companies such as Ctrip.com International (CTRP), Jumei International (JMEI), Homeinns Hotel Group (HMIN), New Oriental Education (EDU), and Qunar Cayman Islands Ltd. (QUNR) would be favorably impacted due to a rise in consumer sentiment.

For more analysis on mutual funds, please visit Market Realist’s mutual funds page.

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