Construction, commodity and retail stocks were likely to be the biggest winners from Beijing's economic policies next year, analysts said.
Promoting domestic consumption and urbanisation would be key themes on the mainland next year, Xinhua said after the country's annual economic policy-setting conference yesterday.
Christopher Cheung Wah-fung, legislator for financial services in Hong Kong, said urbanisation could mean villages being transformed into urban areas as well as more people moving from the countryside to live in the city. "In both scenarios, we can predict there would be more building construction and more demand on resources. This would boost stocks in construction, property, commodities and retail," he said.
Brett McGonegal, chief executive of Reorient Financial Markets, said urbanisation was critical to boosting domestic demand. "As China continues to transition from a low-cost-labour and export-driven economy to a domestic-demand-driven economy, the establishment of larger urban centres is crucial," McGonegal said. "As cities expand, so too does housing, schooling, health care and physical infrastructure, thus increasing capital expenditure. This is a critical phase of development, as it spurs personal consumption and government expenditure."
McGonegal said the growth would benefit sectors such as heavy machinery, cement, housing and commercial property developers, retailers and luxury goods makers.
Alex Lee, from investment management firm BEA Union, said the transition of the economy from capital spending to consumption would create both losers and winners in terms of stock prices.
"During the early phases of China's industrialisation, a ramp-up in infrastructure and utilities occurred, and the nation was commodity-intensive for base metals such as steel, iron ore and cement, which were the clear winners," Lee said. "As China shifts towards consumption, other metals - such as aluminium, copper, nickel and tin - should benefit more, as the 'wealth effect' will boost consumption of cars, electronics and electricity."
Charles Somers, a portfolio manager with British fund house Schroders, said the food industry would be among the beneficiaries of urbanisation and higher domestic consumption.
"Many more mainlanders have been moving to cities and growing richer," Somers said. "When people get wealthier, they tend to eat better and eat more meat and dairy products. They also dine out more."
In the next five years, food consumption on the mainland is expected to grow by 8 per cent per year, while spending on dining out is expected to rise 18 per cent per year. Somers sees this was good news for fertiliser makers and meat producers.
He said restaurant operators and manufacturers of agricultural machines or fertiliser would benefit, as well as dairy producers, since people in cities ate more dairy products.
"People in urban areas spend more on dining out at restaurants, entertainment, travel and luxury goods," Somers said.