Citi has identified three U.S.-traded Chinese stocks that are positioned to benefit from Beijing’s recently announced economic stimulus program. China introduced several supportive policies last month to revive its economic growth and bolster market and consumer confidence. The Chinese government’s efforts have already shown a significant impact, with Chinese internet stocks experiencing substantial gains last week. For instance, the KraneShares China Internet ETF has surged by 45% since. Despite these impressive gains, Citi analysts believe the market has not fully priced in the potential for improved macroeconomic conditions and earnings growth. “We believe [the] market has not priced in estimate revision cycle on possible improving macro and earnings growth outlook,” said Citi analysts led by Alicia Yap in a note to clients on Sept. 29 “The wealth effect from market rally should boost consumer confidence and in anticipation of higher consumption demand, could encourage businesses/advertisers to increase ad spend budget, translating to higher ad [revenues] growth and increase online and offline activities.” The Wall Street bank named Tencent , Trip.com Group and Meituan as their top picks to capitalize on the post-stimulus rally. The three stocks are also traded in the U.S. Tencent The technology conglomerate and owner of WeChat stands to benefit from multiple aspects of the stimulus program, according to Citi. Tencent has a diverse portfolio of businesses, including social media, gaming, and digital payment services, which could be impacted by increased consumer spending and online activity. “We believe the possible revive economic growth following positive stimulus policy will likely lead to improving advertisers ad spend sentiment which will benefit online ad revenues growth for Tencent, Weibo and others,” the analysts noted. “With relatively lower ad load and effective social influences, we believe Tencent Video Account and overall WeChat ecosystem to gain higher ad budget mindshare.” Trip.com Trip.com Group , a leading online travel service provider, is expected to gain from the resurgence in China’s travel industry, according to the Wall Street bank. “The timely policy stimulus ahead of Golden Week holidays is likely to encourage higher traveling budget spend on upgraded services or encourage more consumers to plan on longer-haul journeys thanks to wealth effect and better visibility on job security,” Citi analysts said. Meituan Meituan , a Chinese shopping platform, is also poised to benefit from increased consumer spending, particularly in areas such as food delivery and local services, Citi said. The bank also added that demand for entertainment, movies, karaoke, and dining will “remain resilient despite some eagerness to spend.” “This supports our positive view on TCOM and Meituan despite [year to date] outperformance,” the analysts added. — CNBC’s Michael Bloom contributed reporting.
