The capital rebalancing is driving a rebound in the consumer sector, particularly for gold and jewelry stocks, according to a recent research note. Guosen Securities Co.,Ltd. maintains an "outperform" rating on the sector. The firm argues that while short-term external macro uncertainties have increased, the resilience of domestic demand remains intact. Companies with a global outlook, deep integration of AI technology for full-chain upgrades, and strong product capabilities that precisely meet consumer needs are accelerating their long-term value proposition.

Mass-market jewelry brands showed solid actual sales in Q2, with the recent stock price correction being primarily driven by external gold price volatility. Many stocks are now trading near their historical valuation lows, offering relatively high dividend yields. A stabilization in gold prices could trigger a significant share price recovery. Cross-border e-commerce stocks also hold a clear comparative advantage in terms of mid-year report performance, while core companies' own operational adjustments are generating incremental profit growth.

The firm's main views highlight that consumer fundamentals faced pressure in Q2, but the resulting stock price oversold correction was significant. Capital rebalancing has now triggered a rebound. In the first half of the year, national retail sales grew by 1.3%, with June's 1.0% growth bouncing back from May's negative figure. The overall consumer sector fundamentals were relatively subdued, but structural highlights were evident in areas like high-end consumption and cross-border expansion. The sector's extreme divergence in performance led to a pronounced oversold condition. Therefore, recent capital rebalancing is the core driver of the current consumer sector rebound. The first phase of the rebound is expected to be a recovery of oversold stocks. The sustainability and extent of individual stock gains will depend on the upcoming mid-year report disclosures and the alignment of a company's fundamentals with its valuation and dividend yield. As expectations for domestic policy support strengthen in the second half of the year, thematic investment opportunities are likely to emerge.

Gold and jewelry stocks present a dual recovery opportunity. First, a consumption oversold recovery: The sector experienced a significant correction in Q2, primarily due to gold price volatility. While demand for high-priced, cost-based products was impacted by price-sensitive consumers, mass-market brands performed well through flexible promotions and demand for weight-based products. Leading brands like Chow Tai Fook and CHJ maintained relatively positive Q2 same-store sales growth. Second, an expected recovery in gold prices: London gold has recently rebounded to around $4,400 per ounce. The current valuation of leading companies has fallen back to the lower end of their historical valuation ranges, fully reflecting the pessimistic expectations under gold price volatility. This suggests that with the current gold price rebound, the removal of this key pressure point could unlock considerable upside potential. Furthermore, their attractive dividend yields make them appealing for yield-seeking capital allocation.

Risks include a slower-than-expected consumer recovery, intensified industry competition, and changes in company management.