Four technology stocks are set to be “winners from a potential consumer recovery” in China, according to HSBC. The Asia-focused bank said Beijing’s decision to relax Covid-19 restrictions means Dongshan Precision , Luxshare , Wingtech and Sunny Optical are well-placed to capitalize on a pickup in demand for consumer goods. The investment bank said the consumer electronics sector had hit rock bottom over Covid restrictions that had been in place until last month. Consequently, shares of Luxshare, Wingtech and Sunny Optical have fallen between 37% and 57% this year. Dongshan Precision’s decline of 9% this year beat the benchmark CSI 300 index, which has fallen by 20% over the same period. “With the recent loosening of pandemic control policies in China, we believe a faster-than-expected demand recovery and inventory destocking of consumer electronics are likely in the coming months,” the analysts said in a research note to clients on Dec. 6. “We believe image sensors, power management, touch and display drivers, RF, memory, passive components, panels, etc., are the most affected by the headwinds in the past few quarters and are likely to see a strong rebound.” All four companies in HSBC’s report are either direct or indirect suppliers of Apple . HSBC said Luxshure and Dongshan Precision derived 43% and 30% of their revenues from the U.S. tech giant by making or assembling parts for the AirPods Pro, iPhone and Apple Watch. That means the two companies face downside risks if orders from Apple do not materialize or there is a drop in consumer demand for Apple products. Earlier this week, two investors spoke to CNBC Pro to make a case for and against Apple. Meanwhile, the HSBC analysts noted that Wingtech and Sunny Optical are relatively diversified businesses with about half their revenues sourced from Android smartphone manufacturing and more than a 10th attributed to the automotive sector. According to recent Bank of America research, a handful of global chip tech stocks are also set to soar on strong EV car sales in China. While a rise in consumer demand was assured in the near term, Xiaolin Chen, head of international business at ETF firm KraneShares, warned that sustained Chinese GDP growth of 5% every year faced hurdles. “Reopening is set. You have the target, but along the way, I’d say it’s going to be a bumpy road.”
