CN Assets Select|09 A Guide to Counter-Cyclical Investing in China

Why Focus on China Assets Now?

As we move into the second half of 2025, activity in China’s economy has picked up — supported not only by a sequence of policy measures but also by a clear rebound in several high-frequency indicators:

Service activity at a 15-month high: In August 2025, China’s services sector recorded its strongest monthly expansion in 15 months, driven by a recovery in domestic demand and a pickup in external orders.

Retail recovery and consumption stimulus: Retail sales showed renewed strength — in May year-on-year retail growth was +6.4%, with appliance replacement and promotional events (e.g., shopping festivals) contributing to the improvement.

Persistent stabilization expectations: Multilateral institutions have noted that China retains room for policy support, which helps underpin a pro-growth policy mix.

Put together, this looks less like a one-off blip and more like a meaningful counter-cyclical rebound that warrants attention from investors.

1) Which sectors qualify as “counter-cyclical” value opportunities?

By “counter-cyclical” we mean sectors that do not move in lock-step with the broader economic cycle. When manufacturing and cyclical sectors struggle, some industries show resilient demand, steady cash flows, and lower volatility. Key features: inelastic demand, stable margins and predictable cash generation.

Consumer staples / staples consumption

Essential consumer goods — food & beverage, packaged goods, and large-appliance categories — tend to show low demand elasticity. Even in slower growth phases, households continue to purchase daily necessities. Investment case: Consumer staples can act as defensive anchors in a portfolio; when sentiment deteriorates, these names often attract risk-off flows.

Healthcare / Pharmaceuticals

Healthcare services, pharmaceuticals and medical devices are classic defensive sectors. Healthcare demand is relatively insensitive to short-term GDP swings — people continue to consume medical products and services irrespective of the cycle. Historical context: For example, during broad market weakness driven by deleveraging and regulatory shocks, healthcare indices have tended to outperform the broader market (illustrative case: in prior sell-offs, healthcare-related indices have registered substantially smaller declines than the main index). Investment case: Beyond defensiveness, healthcare benefits from structural drivers such as ageing demographics, healthcare reform, and rising R&D and export opportunities for innovative drugs.

Utilities

Water, power and gas providers deliver essential services and typically have stable, contract-backed cash flows. These businesses often pay steady dividends and are less sensitive to short-term economic shocks. Investment case: In volatile markets, utilities can reduce portfolio volatility and provide income — acting as a “shock absorber” for equity allocations.

2) Why allocate to counter-cyclical sectors now? — Valuation + Defense

There are two complementary reasons to consider these sectors for allocation: attractive valuations and defensive income characteristics.

Valuation pockets — “cheap enough” to matter

Over the past few years, sectors like consumer staples and healthcare have seen multiple compression from policy shocks and cyclical weakness. For many leaders within these sectors, valuation multiples have reset to or below long-term averages. That creates what we would call a valuation pocket — not necessarily growth at all costs, but a meaningful margin of safety for long-term investors.

Defensive yield and downside protection

The primary appeal of counter-cyclical sectors is downside resilience. Revenue streams in staples, healthcare and utilities tend to be stable, which translates into more predictable earnings and, often, steady dividends. In a low-rate or rate-cut environment, stable dividend yields (for example, certain utilities historically yielding in the mid-single digits) become especially attractive.

Illustrative risk-reduction example: A healthcare ETF or basket can display annualized volatility substantially lower than high-beta indices — for example, a defensive healthcare ETF might report annualized volatility near ~10% versus ~25% for a small-cap or growth index. Adding such defensive exposure to a portfolio is akin to adding ballast: it reduces peak-to-trough swings and limits maximum drawdowns.

3) Practical takeaways for portfolio construction

• Combine valuation and stability: Look for companies with reasonable valuations, healthy cash flows and resilient demand profiles. The mix of valuation headroom and earnings stability is valuable.

• Income as a defensive tool: Consider dividend yields and cash-flow sustainability — utilities and some consumer names can offer attractive yield profiles that cushion total returns.

• Use defensive sleeves to manage drawdowns: Consider allocating a defined defensive sleeve to staples, healthcare and utilities, and manage it with clear size and rebalancing rules.

• Don’t expect overnight alpha: Counter-cyclical assets are not a quick-win trade; their core role is protection and steady contribution to returns during volatile periods.

  4)ETF toolkit for counter-cyclical exposure

5)Invest in China with Tiger—your one-stop solution

Bullish on China but not sure how to allocate? With one Tiger account, you can invest in a range of China-related assets:

A-shares Connect: $HUATAI-PINEBRIDGE CSI 300 INDEX TRADING SECURITIES INVESTMENT FUND(510300)$ ; $CARD IN 500 EXCHANGE-TRADED INDEX SECURITIES INVESTMENT FUND(510500)$ ; $E-FUND GEM TYPE OPEN INDEX TRADING SECURITIES INVESTMENT FUND(159915)$ $Contemporary Amperex Technology Co.,Ltd.(300750)$ ; $Kweichow Moutai Co.,Ltd.(600519)$

Hong Kong Market: $Xinjiang Tianshun Supply Chain Co.,Ltd.(002800)$ $HSCEI ETF(02828)$ $CAM MSCI A50(02839)$ ; $TENCENT(00700)$ , $MEITUAN-W(03690)$ , $CHINA MOBILE(00941)$

US Markets: $Xtrackers Harvest CSI 300 China A-Shares ETF(ASHR)$ , $KraneShares CSI China Internet ETF(KWEB)$ , $iShares China Large-Cap ETF(FXI)$ , $Alibaba(BABA)$ , $BIDU-SW(09888)$ $PDD Holdings Inc(PDD)$

In addition, Tiger Trade’s signature features—TigerAI and Recurring Investment—make it easier to build exposure to Chinese assets:

• TigerAI Investment Assistant: New to Chinese assets? Ask anytime—e.g., “Which ETFs track the CSI 300?” or “Which China ADRs are trending lately?”—and get answers instantly.

• Recurring Investments for HK stocks & ETFs: Worried about timing? Tiger Trade supports daily/weekly/monthly recurring plans for Hong Kong stocks and ETFs to average your cost, build long-term positions, and pursue steadier outcomes.