Citi Asia Pacific Views: China Consumer, Internet and Airlines
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Citi Research's Asia Pacific note (September 4, 2026) examines three China themes. Consumption: 1H26 results split 27% beat / 38% in line / 35% miss; structural trends — experiential spending, health focus, the silver economy, new channels and multi-brand strategies — remain intact, but Citi re-ranked sectors using updated 2H26E outlooks. Top buys: Mengniu and Nongfu Spring among staples; Anta, Midea and Atour in discretionary; Midea, Yum China, H World and Yihai offer attractive cash returns; Haidilao, Li Ning and China Duty Free could outperform if 2H26 stimulus exceeds expectations. Internet: 2Q26 results broadly weakened on soft macro activity, AI-generated content disruption, rising operating expenses, surging capex and FX headwinds; the sector's -19.8% year-to-date return lags Japan (+15.6%), India (+1.5%) and the US (-6.5%). Chinese AI model progress was the standout, though hyperscaler capex surges turned free cash flow negative. Citi expects 3T+ parameter models and open-platform monetization proof in 2H26; top picks are Tencent, Alibaba, Meituan, PDD, Full Truck Alliance and Meitu. Airlines: contrarian initiation — no imminent aircraft shortage, domestic oversupply caps pricing power despite optimism on rising international yields; Air China and China Southern start at Sell, China Eastern at Neutral.