Finance
China’s Golden Week holiday signals persistent consumer caution
Passengers line up to check in at Chengdu Tianfu International Airport on October 6, 2024 as China’s week-long National Day holiday draws to a close.
China News Service | China News Service | Getty Images
BEIJING — China’s Golden Week holiday affirmed a trend in more cautious spending, while consumers put greater emphasis on experiences.
The seven-day public holiday that ended Monday recorded about 2% less spending per domestic trip than the pre-pandemic level, according to Goldman Sachs analysis published Tuesday.
“Low tourism spending per head and subdued services prices highlighted still weak domestic demand and continued consumption downgrading,” the analysts said.
The decline was an improvement from a gap of more than 10% during holidays in the spring, the Goldman report said.
The Golden Week holiday in China commemorates the founding of the People’s Republic of China on Oct. 1. It is the last public holiday of the year for the country.
Nearly one-fifth of bookings on Trip.com for the holiday came from users ages 20 to 25, making them the main consumer group, the company said. It noted more than 90 concerts were held during the holiday, and that daily growth in orders for performances and exhibitions grew by an average of more than 80% during the period.
However, a lack of blockbusters resulted in a drop in box office earnings, to 2.1 billion yuan ($300 million) this year, from 2.7 billion yuan last year, according to state media, citing the China Film Administration.
Consumers were also more spontaneous.
Trip.com said nearly 30% of travelers booked travel on the same day, or one day in advance, a 6 percentage point increase from last year. The average number of days customers booked in advance fell to 6 days this year, down from 6.8 days last year, the company said.
The holiday this year followed a flurry of policy announcements and promises, and a stock market surge. Consumer spending in China has been lackluster since the pandemic due to uncertainty about future income and economic growth.
“People become more cautious with spending. Also they opt for more affordable options of travel and affordable locations,” Kenneth Chow, principal at Oliver Wyman, told CNBC on Wednesday.
“People are much more interested in spending on things they can talk about, things they can post [on social media] about, rather than just the big ticket items,” he said. He said such shifts mean brands, including luxury ones, need to focus more on communicating the benefits to potential Chinese consumers.
“When people are becoming much more sophisticated, the proposition has to change, and whoever is able to adapt to that new trend first will be able to win,” Chow said. “It’s not just about Chinese brands. It’s not just about overseas brands. It’s about who’s going to react first and who’s going to capture the attention of Chinese consumers first.”
Appliance sales climb
Christine Peng, head of the Greater China consumer sector at UBS, pointed out Wednesday that Golden Week figures indicated recovery in spending was tied to trade-in policies for appliances.
Retail sales rose by 9% during the holiday, while sales of home appliances surged by 149.1%, according to state media, citing figures from the tax administration. It did not provide the amount spent.
“The Golden Week consumption could still suggest a modest recovery versus August, in our view, due to trade-in subsidies (for appliances and autos) and consumption vouchers issued by the local governments,” Peng said. “For example, Shanghai’s retail sales rose 3%, a recovery versus -3% YoY this August.”
During Golden Week, mainland China recorded 765 million domestic trips, up from both the prior year and before the pandemic, according to the Ministry of Culture and Tourism.
However, by another measure of counting from the ministry, China had received 782 million domestic visits in 2019. It was not immediately clear whether the figures were comparable.
The average number of mainland China residents traveling across the border rose to 1.08 million a day during this year’s holiday, up from 1.01 million a day in 2019, according to CNBC calculations of official data.
Japan, Thailand and the U.K. were among the more popular destinations, according to booking site Trip.com.
Chinese mobile pay expands
Overseas transactions by China’s Alipay users surged by 60% during the first four days of the holiday versus the year-ago period, according to the mobile payments operator, owned by Alibaba-affiliate Ant Group.
Malaysia, Korea, Thailand, Hong Kong and Singapore were the top destinations for Chinese tourists by transaction volume growth, Alipay said. It noted that rather than shopping, the Chinese travelers also spent significantly on entertainment, food and beverage, services and transportation.
Foreign visitors to mainland China using Alipay spent more than twice the amount during the first four days of the holiday, versus a year ago, the company said. China has introduced visa-free travel for more countries, while Alipay and WeChat Pay — the two dominant mobile pay apps in the country — have in the last two years made it easier for foreigners to use the apps.
Hong Kong said that visitors from mainland China visitors averaged 170,000 per day during the holiday, 27% more than a year ago. On Oct. 1, Hong Kong said it received 220,000 visitors from the mainland, the highest since the end of Covid-19 border controls.
Oliver Wyman’s Chow noted how hotels, especially those in Hong Kong, were adapting to lower prices per night by selling more food or other experiences.
Cybersecurity and enterprise software stocks have been market dogs in 2026, with fears that AI will wipe out a wide range of companies in the enterprise space dominating the narrative. But they snapped a brutal losing streak this past week, joining in the broader market rally that saw all losses from the U.S.-Iran war regained by the Dow Jones Industrial Average and S&P 500.
Cybersecurity has been “a victim of some of the AI-related headlines,” Christian Magoon, Amplify ETFs CEO, said on this week’s “ETF Edge.”
It wasn’t just niche cybersecurity names. Take Microsoft, for example, which was recently down close to 20% for the year. Its shares surged last week by 13%.
A big driver of the pummeling in software stocks was a rotation within tech by investors to AI infrastructure and semiconductors and some other names in large-cap tech, Magoon said, and since cybersecurity stocks and ETFs are heavily weighted towards software companies, they were left behind even as those businesses continue to grow on a fundamental basis.
But Wall Street now has become more bullish with the stocks at lower levels. Brent Thill, Jefferies tech analyst, said last week that the worst may be over for software stocks. “I think that this concept that software is dead, and then Anthropic and OpenAI are going to kill the entire industry, is just over-exaggerated,” he said on CNBC’s “Money Movers” on Wednesday.
“Big Short” investor Michael Burry wrote in a Substack post on Wednesday that he is becoming bullish about software stocks after the recent selloff. “Software stocks remain interesting because of accelerated extreme declines last week arising from a reflexive positive feedback loop between falling software stocks and changes in the market for their bank debt,” he wrote.
The Global X Cybersecurity ETF (BUG), is down about 12% since the beginning of the year, with top holdings including Palo Alto Networks, Fortinet, Akamai Technologies and CrowdStrike. But BUG was up 12% last week. The First Trust NASDAQ Cybersecurity ETF (CIBR) is down 6% for the year, but up 9% in the past week.
Piper Sandler analyst Rob Owens reiterated an “overweight” rating on Palo Alto Networks which helped the stock pop 7% — it is now down roughly 6% on the year. Its peers saw similar moves, including CrowdStrike.
Performance of Global X cybersecurity ETF versus S&P 500 over past one-year period.
Magoon said expectations may have become too high in cybersecurity, and with a crowding effect among investors, solid results were not enough to to push stocks higher. But the down-and-then-back-up 2026 for the sector is also a reminder that when stocks fall sharply in a short period of time, opportunity may knock.
“Once you’re down over 10% in some of these subsectors, you start to see the contrarians start to say, ‘well, maybe I’ll take a look at this,'” Magoon said.
He said AI does add both opportunity and uncertainty to the cybersecurity equation, increasing demand but also introducing new competition. But he added, “I think the dip is good to buy in an AI-driven world,” specifically because the risks to companies may lead to more M&A in cyber names that benefits the stocks.
For now, investors may look for opportunity on the margins rather than rush back into beaten-up tech names. “I think investors are still going to remain underweight software,” Thill said.
But Magoon advises investors to at least take the reminder to keep an eye on niches in the market during pronounced downturns. “The best-performing are often the least bought and do the best over the next 12 months versus late-in-the-game piling on,” he said.
While that may have been a mindset that worked against the last investors into cybersecurity and enterprise software in mid-2025 when the negative sentiment started building, at least for now, it’s started working for the stocks in the sector again.
Meanwhile, this year’s biggest winner is also a good example of what can be an extended trade in either a bullish or bearish direction. Last year, institutional ownership of energy was at multi-year lows, Magoon said, referencing Bank of America data. “Reverse sentiment can be a great indicator,” he said.
But he cautioned that any selective buying of stocks that have dipped does have to contend with the risk that there is a potentially bigger drawdown in the market yet to come in 2026. That is because midterm election years historically have been marked by large drawdowns. “If you think it is bad right now, it could get a lot worse,” Magoon said. But he added that there’s a silver-lining in that data, too, for the patient investor. The market has posted very strong 12-month returns after midterm election drawdowns end. So, for investors with a longer-term time horizon and no need for short-term liquidity, Magoon said, “stick in there.”
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New innovation in the exchange-traded fund industry could come at a cost to investors during extreme conditions.
According to MFS Investment Management’s Jamie Harrison, ETFs involved in increasingly complex derivatives and less transparent markets may be in uncharted territory when it comes to violent downturns.
“Those would be something that you’d want to keep an eye on as volatility ramps up,” the firm’s head of ETF capital markets told CNBC’s “ETF Edge” this week. “As innovation continues to increase at a rapid pace within the ETF wrapper, [it’s] definitely something that we advise our clients to be really front-footed about… Lack of transparency could absolutely be an issue if we’re going to start seeing some deep sell-offs.”
His firm has been around since 1924 and is known for inventing the open-end mutual fund. Last year, ETF.com named MFS Investment Management as the best new ETF issuer.
“It’s important to do due diligence on the portfolio,” he said. “Having a firm that has deep partnerships, deep bench of subject matter experts that plays with the A-team in terms of the Street and liquidity providers available [are] super important.”
Liquidity as the real issue?
Harrison suggested the real issue is liquidity, particularly during a steep sell-off.
“We’ve all seen the news and the headlines around potential private credit ETFs. That picture becomes much more murky,” he added. “It’s up to advisors, to investors [and] to clients to really dig in and look under the hood and engage with their issuers.”
He noted investors will have to ask some tough questions.
“What does this look like in a 20% drawdown? How does this liquidity facility work? Am I going to be able to get in? Am I going to be able to get out? And if I’m able to get out, am I able to get out at a price that’s tight to NAV [net asset value], and what’s the infrastructure at your shop in terms of managing that consideration for me,” said Harrison.
Amplify ETFs’ Christian Magoon is also concerned about these newer ETF strategies could weather a monster drawdown. He listed private credit as a red flag.
“If your ETF owns private credit, I think it’s worth taking a look at, kind of what the standards are around liquidity and how that ETF is trading, because that should be a bit of a mismatch between the trading pace of ETFs and the underlying asset,” the firm’s CEO said in the same interview.
Magoon also highlighted potential issues surrounding equity-linked notes. The notes provide fixed income security while offering potentially higher returns linked to stocks or equity indexes.
“Those could potentially be in stress due to redemptions and the underlying credit risk. That’s another kind of unique derivative,” Magoon said. “I would very closely look at any ETF that has equity-linked notes should we get into a major drawdown or there be a contagion in private credit or something related to the banking system.”
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