On November 10, driven by multiple positive developments, the consumption sectors in both A-shares and Hong Kong stocks surged. Traditional consumption segments like baijiu, tourism, and retail, as well as new consumption areas such as trendy toys and tea beverages, delivered strong performances. Notably, China Tourism Group Duty Free Corporation (CTGDF) hit a rare limit-up, reaching a two-year high.

Often dubbed "old-timer stocks" by investors for missing out on the recent tech rally and showing lackluster performance for multiple quarters, sectors like baijiu and duty-free have long been out of the spotlight. In Q3, mutual funds exhibited divergent strategies toward both traditional and new consumption sectors. Several fund managers focusing on consumption now believe the prolonged valuation adjustment in the sector offers a safety margin for investment, with stock selection centered on domestic demand and overseas expansion.

**Consumption Stocks Rally Collectively** On November 10, consumption stocks in A-shares and Hong Kong markets soared. In A-shares, baijiu, air transport, and duty-free sectors stood out, with CTGDF locking in a limit-up with CNY 503 million in buy orders. Other gainers included Shede Spirits, Jiugui Liquor, Sanyuan Foods, and Manor Dairy, which also hit limit-ups. In Hong Kong, brands like Auntie Shanghai surged over 13%, Mixue Group rose nearly 9%, and POP MART climbed over 8%, followed by Weilong Delicious, Nayuki Tea, and Chabaidao.

The rally was fueled by multiple catalysts: - On November 7, the Ministry of Finance announced plans to continue policies boosting consumption in its H1 2025 fiscal report. - On November 9, the National Bureau of Statistics reported a 0.2% YoY rise in the CPI, reversing the previous month’s decline, with core CPI (excluding food and energy) extending its six-month uptrend.

The stock rally lifted related ETFs, with tourism, food & beverage, and consumption-themed funds leading gains. Two tourism ETFs rose nearly 6%, while a baijiu ETF gained 4.5%. Another 28 funds, including Hong Kong-listed consumption and food & beverage ETFs, rose over 3%.

Year-to-date, traditional consumption has lagged. The baijiu index is among the few decliners, down ~5.45%, while the retail index edged up just 0.75%. The food & beverage sector’s P/E of 21.29x sits at the 12.52% percentile of its decade-long range. New consumption stocks, primarily listed in Hong Kong, shone in H1 (e.g., POP MART, Lao Feng Xiang, Mixue), but retreated in H2 amid a tech bull market’s "siphon effect."

**Divergent Fund Strategies** Once "white-horse stocks" in the core-asset bull market (e.g., baijiu), these sectors have become "old-timers" in the current tech rally. As they retreated, mutual funds gradually reduced exposure.

For instance, Kweichow Moutai saw active equity funds’ holdings drop to CNY 27.46 billion in Q3 2025 (ranked 7th), held by 573 funds—down sharply. Zhuang Shaoqing’s Fullgoal Tianhui Growth slashed its long-time top holding, citing "persistent sluggishness" in consumption.

However, E Fund’s Zhang Kun, a staunch Moutai bull, added to his positions, reiterating long-term confidence in China’s domestic consumption. He projects: "China’s consumption growth > China’s GDP growth > global GDP growth," dismissing short-term pessimism as overblown.

Similarly, funds diverged on new consumption like POP MART. Wind data shows funds holding POP MART fell from 286 in Q2 to 180 in Q3, with shares held dropping ~31% to 43.82 million. While some funds (e.g., GF Industry Select, GF Value Core) exited top-10 holdings, 70 products added exposure, with several making it their top pick. One fund noted: "Hong Kong’s new consumption stocks have corrected since June peaks, but core growth logic remains intact."

**Focus on Domestic Demand & Global Expansion** Fund managers highlight the sector’s "valuation + fundamentals" repair: historically low valuations coupled with policy support and rising consumer spending promise gradual recovery, offering a safety margin. Stock selection emphasizes domestic demand and global expansion.

Zhang Kun stated: "China’s domestic consumption remains fertile ground for long-term investment, with current valuations providing ample safety margins. We recognize market sentiment swings but believe free cash flow growth will ultimately reflect in intrinsic value and market cap."

Beyond domestic demand, Xingyin Fund spotlighted the shift from "capacity exports" to "brand exports." Amid weak domestic recovery, overseas expansion—especially in food & beverage, apparel, and appliances—offers solid growth, with Southeast Asia, Africa, and the Middle East as key markets.

Quanguo Fund’s Sun Wei added: "Chinese firms’ overseas competitiveness stems from thriving in a vast domestic market first. Successful global expansion unlocks significant growth potential."