Pinduoduo fell nearly 30% last week on disappointing quarterly results, a reminder that China's consumers have largely shaken off years of double-digit growth. The economic slowdown shows few signs of reversing anytime soon. That doesn't mean it's a blanket sell-off. Charlie Chen, managing director and head of Asia research at China Renaissance Securities, pointed out that Pinduoduo’s revenue has increased by nearly 90% from a year ago, while profits have more than doubled. “The reaction of its stock price is disconnected from its fundamentals,” he said in Mandarin (translated by CNBC). “Yes, the entire Chinese consumer market is weak, but Pinduoduo's management made very strange comments that caused the stock price to fall,” he said. Pinduoduo chairman and co-chief executive Chen Lei repeatedly warned of future profit declines during an earnings call. But analysts noted that despite the price target cut, the stock's valuation remains attractive. Other earnings reports painted a less dire picture. Chinese food delivery company Meituan-Dianping on Wednesday reported second-quarter revenue and profit that significantly exceeded FactSet estimates. Revenue grew 21%, and adjusted earnings nearly doubled from a year ago. According to FactSet, Morgan Stanley upgraded the Hong Kong-listed stock to overweight from equal weight, while JPMorgan raised its price target to HK$140 ($17.95) with an overweight rating. That's an 18% increase from Meituan-Dianping's closing price on Friday and a gain of nearly 10% this week. The delivery company, which also owns the Chinese version of Yelp, said its in-store, hotel and travel businesses maintained “strong growth.” Management hasn't commented much on consumer sentiment other than a clear preference for value for money. “Under the current macro environment, the demand for low-star hotels has increased,” Chief Executive Wang Xing said on an earnings call, according to FactSet. Chinese booking site Ctrip, which is listed in the U.S. and Hong Kong, according to FactSet Trip.com reported on August 26 that its revenue and profits increased slightly. Trip.com stated that in the second quarter of 2019, outbound travel bookings recovered to 100% of pre-COVID-19 levels. Trip.com's Hong Kong-listed shares rose nearly 12% last week. “I think people are now turning more to experience consumption rather than commodity consumption, because of commodities, you can only have so many,” said Ren Liqian, head of quantitative investment at WisdomTree. She pointed out that there is more pent-up demand for travel, which is expected to last for about a year, because people can purchase goods through e-commerce platforms during the epidemic. However, Ren Zhengfei pointed out that the real estate downturn and general income uncertainty are limiting consumer spending. Retail sales increased by 2.7% year-on-year in July, following a 2% increase in June. Ren Zhengfei said that an effective way for China to support the economy may be to take proactive rather than reactive measures: removing all restrictions on home purchases so that all people living in cities can enjoy the same benefits. People who have just moved to the city to work may not necessarily be able to enroll their children in local schools without obtaining the so-called “hukou”. Many cities, including Beijing, still limit the number of properties people can buy. “As long as the Chinese government realizes that it has multiple tools to stay ahead of the market, it will stop the slow process of people not wanting to spend money,” Ren said. Other companies such as Yum China are still adopting new technologies despite a slowdown in consumer spending. business strategies to increase profits. In early August, the operators of KFC and Pizza Hut in China reported second-quarter profit growth of 19%, reaching 55 cents per share, exceeding FactSet's forecast of 47 cents. About 80% of Pizza Hut stores have automatic fryers and 50% have robotic servers, CEO Joey Wat said, noting that tasks from labor scheduling to inventory management are fully automated. Yum China's U.S.-listed shares rose more than 1% last week. At the same time, the tepid environment generally supports a more conservative bias among investors. According to Wind information, the banking industry is one of the few sectors in Hong Kong's Hang Seng Index to have risen by double digits so far this year. Analyst Richard Xu and his team said in a mid-August report that Hong Kong-listed Postal Savings Bank of China is Morgan Stanley's new top pick in the sector. “We believe that a shift in the monetary policy framework, a slowdown in loan growth window guidance and central bank support for long-term bond yields will create a conducive environment for bank (net interest margin) stabilization and rebound,” the report said. “Across all banks, “We believe Postal Savings Bank of China is one of the banks best positioned to capitalize on this trend.” Morgan Stanley expects Chinese bank stocks to outperform for the fourth consecutive year. “We believe that the inventory in the real estate market will drop to a more reasonable level by mid-2025. This means that the drag of the real estate market adjustment or slowdown on the sluggish economy will be greatly reduced,” Xu said in an interview. He is also watching whether pressure to expand industrial capacity has eased, helping to improve corporate profit margins. “If these factors start to weaken over time, some other sectors may fare better than banks.”