Consumer shares to gain from HK link

For international investors seeking advice on which stocks to buy through the Shanghai-Hong Kong Connect exchange link, the message from Chinese analysts is clear: pile into consumer shares and avoid raw-materials companies.

More than half of 17 Shanghai stocks eligible for the program with unanimous buy ratings are in consumer industries, according to data compiled by Bloomberg. Qingdao Haier Co, an appliance manufacturer, and Tasly Pharmaceutical Group Co, a seller of Chinese medicine, are projected to climb more than 30 percent in the next 12 months. That compares with forecasts for declines of at least 20 percent in Aluminum Corp of China Ltd and Zijin Mining Group Co Ltd.

Foreign investors will gain access to more than 180 consumer-related companies in Shanghai when the link starts on Nov 17, making it easier for them to add exposure to the part of China's economy that Morgan Stanley estimates has grown to 47 percent of gross domestic product from 43 percent in 2008. While analysts were overly optimistic about consumer shares a year ago, Eastspring Investments said the stocks are poised to rally now as China's 1.3 billion people increase spending.