China Pushes Consumption Growth with Birth Rate Boost

China's and Hong Kong's stocks surged as consumer shares led gains after a northern city announced incentives to boost birth rates. The market anticipates further measures to enhance domestic consumption. Liquor and milk companies experienced significant growth, indicating a shift towards consumer stock preference.

In a move poised to invigorate market prospects, stocks in China and Hong Kong rallied on Friday, driven predominantly by a robust surge in consumer shares. This came in the wake of an announcement by Hohhot, a city located in northern China's Inner Mongolia, detailing plans to implement financial incentives to elevate birth rates.

State media reported the proposed cash subsidies for couples deciding to expand their families. Investors speculate that more cities and provinces might replicate this approach. Notably, consumer staples experienced a 3.6% uptick, highlighted by significant gains in companies like milk giant Yili, which rose by 6.2%, and Mengniu Dairy in Hong Kong with a rise of 8%.

Investment focus shifted as UBS Strategist James Wang advocated for consumer stocks over the previously favored internet sector, pointing to favorable policy and attractive valuations. As the Chinese government's policies increasingly support consumerism, onshore stocks, with a substantive 20% consumer stock representation in the CSI 300 Index, may rally in parity with offshore shares traded in Hong Kong.

(With inputs from agencies.)