Market volatility intensifies, focus on high-certainty assets in domestic demand

As April approaches, uncertainties in regional conflicts are full of uncertainty and are causing a re-pricing of global risk assets. In contrast, in China’s A-share market, although the energy dependence is low and the index resilience is relatively strong, the technology and resources sectors are also facing a rapid liquidity pullback under a high-valuation and crowded structure, and many funds have shifted toward more certain domestic-demand sectors.

Lin Rongxiong, a member of the strategy team at the Guotou Securities Research Center, said: “With reference to the situation in early 2021 when the market saw a broad selloff and then the transition from the ‘Maotai Index’ to the ‘Ning Portfolio,’ 2026 will also enter a ‘rebalancing’ and ‘restructuring’ between overseas technology exports based on resources (90% allocation) and domestic-demand real estate (10% allocation).”

In terms of value-for-money, many core consumer assets are currently at the bottom of the cycle. At present, the 10-year percentile for the price-to-earnings ratios of the food and beverage and home appliances sectors is 4.51% and 20.49%, respectively. The dividend yields for food and beverage, home appliances, and textiles and apparel in 2025 are all above 3.5%, ranking among the top across sectors in the A-share market.

The current domestic-demand sectors have the scarcity of “low valuation + low crowding + strong policy support + a fundamental recovery inflection point.” Stock price performance may precede a rebound in fundamentals. When markets dip, investors may focus on the following domestic-demand themed ETFs: Consumer ETF Huaxia (510630.SH) and Optional Consumption ETF Huaxia (562580.SH).

Consumer ETF Huaxia (510630.SH), which tracks the SSE’s main consumer industry index, provides balanced coverage across consumer sub-sectors such as liquor, dairy, condiments, soft drinks, and beer. Its constituent stocks include Kweichow Moutai, Yili Shares, Haitian Flavouring and Food, Shanxi Fenjiu, Dongpeng Beverage, and others;

Optional Consumption ETF Huaxia (562580.SH), which tracks the CSI All-Index of Optional Consumption, excludes food and beverages and focuses on optional consumption areas such as automobiles, home appliances, and commercial retail. Benefiting from real-estate recovery and the continuation of the “Two New” nationwide subsidy policies, its constituent stocks include Midea Group, BYD, Gree Electric Appliances, Sanhua Intelligent Controls, Fuyao Glass, and others.

Daily Economic News