Daily Investment Strategy

Recommended Stock：Yum China（9987）

The December 9 Politburo meeting hinted at major policy moves. We expect significant consumption stimulus, like nationwide vouchers, to be discussed at next year’s "Two Sessions," with provincial governments likely adopting similar measures. This would boost domestic demand stocks, particularly low-cost restaurant chains. Consumers are increasingly price-sensitive in today’s economy. Yum China’s strategies, like Pizza Hut WOW and KCOFFEE, align with these trends. KCOFFEE’s subscription offers coffee at RMB 5 per cup, and its new store formats have reached 150 and 500 locations, respectively. KFC and Pizza Hut also introduced affordable menu options, lowering spending while attracting broader customers and enhancing loyalty, ensuring stable performance in tough times. Target price: $460.

Retail sales higher than expected

Retail sales grew 0.7% in November, higher than expectations for 0.6%, showing that the U.S. economy is still growing at a healthy pace even if interest rates rise. The Fed is widely expected to cut interest rates by 25 basis points at the end of its two-day meeting on Wednesday. While the rate cut appears to have been largely priced in by the market, especially given the recent gains on Wall Street, the focus will largely be on the Fed's outlook on interest rates. Investors are preparing for a signal from the Federal Reserve to slow down the pace of easing in 2025. There are increasing signs that U.S. inflation is sticky and the labor market is strong.

Hong Kong Stock Connect had a net inflow of HK$7.97bn on Tuesday of which 分China Mobile (941) had the largest net inflow, reaching HK$0.79bn; followed by CCB (939). Meituan (3690) recorded the largest net outflow at $0.44bn, followed by Xiaomi (1810).