China Sector Report: Q3 2020

Another strong area in consumer spending in the US and in China was automobile retail, which enjoyed a recovery after a particularly difficult first half of the year. And whereas the performance of the Consumer Discretionary in the US was also led by the home improvement sub-segment, the Chinese sector benefit from a continued growth of online education platforms, with students remaining with parents working from home.

Despite the positive performance in both countries, China’s Consumer Discretionary sector more than doubled the returns of its benchmark because of strong performance throughout the sector, while the US sector only outperformed its benchmark by just over 1%. China’s travel service companies performed notably well heading into the October 1st – 8th national Golden Week holidays, one of the biggest travel weeks of the year. Leading up to the event, hotel and airline bookings were above those seen prior to the pandemic last year. According to Alibaba, hotel bookings for the week were up by more than 50% compared to the same period in 2019.1

China Sector Underperformers

Sectors that underperformed the broader markets in both the US and China include Financials, Health Care, Real Estate, Utilities, and Energy.

China’s Financials sector experienced slightly negative growth in Q3, underperforming the MSCI China Index by roughly 11% amid fears of the sector becoming overleveraged and the reemergence of shadow banking.

China Health Care’s recent slowdown may be attributed to its strong performance during earlier quarters this year, as the sector was up 37.13% year to date (YTD) – more than double the MSCI China Index’s returns.

Although the Energy sector began demonstrating a strong recovery in Q2, the sector underperformed during Q3, as oil prices remained range-bound at low levels.


COVID-19 continues to reshape the global economic outlook with performance across global markets, including major economies like the US and China. Sectors are impacted by this uneven recovery in uneven ways and over the past several quarters, have divergence significantly in performance. And as we’ve seen throughout this year, mixed economic responses to and recoveries from COVID-19 create a bumpy recovery, elevating the importance of monitoring and adjusting sector exposures to China.

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Disclosure: The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate ...

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