China’s new consumer sector – encompassing beauty products, IP collectibles, and pet-related businesses – has emerged as a standout performer in 2024, delivering impressive returns for actively managed funds that positioned themselves early in these growth segments.
Sector Outperformance
The CSI New Consumption Index has surged 15.71% year-to-date through June 6, dramatically outpacing the broader consumer index (down 0.31%) and CSI 300 (down 1.55%). Market leaders like Pop Mart, Mixue Group, and Lao Feng Xiang Gold have propelled the rally, with their shares reaching record highs.
Fund positioning data reveals:
- 182 funds held positions in Pop Mart worth RMB 8.78 billion at Q1-end
- 39 funds invested in Lao Feng Xiang Gold with RMB 1.66 billion exposure
- Top-performing funds gained over 65% year-to-date through these holdings
Fund Manager Perspectives
While acknowledging potential short-term overheating, portfolio managers remain constructive on the sector’s long-term prospects:
“We didn’t specifically target ‘new consumption’ but identified these stocks through bottom-up research as having authentic growth potential,” explained Song Jialing of Hywin Fund, whose strategy has gained 54.49% this year.
Zhang Huan of Invesco Great Wall emphasizes data-driven selection: “We first identify high-growth products through online metrics, then analyze their success patterns to uncover new sector opportunities.”
Investment Approach
Managers highlight key considerations:
- Stock Selection Over Sector Bets: The new consumer space contains diverse business models requiring company-specific analysis
- Volatility Management: High growth potential comes with elevated valuation risks and price swings
- Generation Z Focus: Successful companies demonstrate strong brand affinity with younger consumers
“Short-term corrections may occur, but the sector’s growth trajectory remains intact,” noted Qu Shaojie of Great Wall Fund, emphasizing companies with proven product innovation capabilities.
Future Opportunities
Song identifies two enduring themes:
Demand Creation: Innovative products that cultivate new consumer needs
Domestic Substitution: Local brands displacing international competitors
Her fund continues targeting high-growth “dark horse” companies across collectibles, personal care, aesthetic medicine, pet products, and jewelry sectors – maintaining conviction despite recent price appreciation.
As earnings season approaches, managers anticipate further validation of their investment theses, with many portfolio companies preparing new product launches that could drive the next leg of growth.
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