China A-shares Thematic Strategy — El Niño Expert Call Takeaway: Upside for Nitrogen Fertilizers and Select Consumers

We hosted an expert call on 3 November on El Nino's global climate shocks and the transmission pathways into A-shares. With the current strongest El Nino on record entering peak phase, the expert specifically pointed out the possibility of drier and warmer weather and reduced precipitation in China. Such weather conditions could lead to lower hydropower generation, high-frequency of outdoor activities, and higher fertilizer usage amidst stressed crop production. Our take is that raw material price hikes, driven by climate anomalies, can lead to incremental cost pressure for the A-share listco space in general, but the impact should be limited as A-share consumers discretionary/staples have average inventory days of 130/237 days. We think the CSI-300 offers decent risk-reward with the current FTM EPS y-y of 19% and FTM P/E of 11.5x, roughly 0.5 standard deviation below its long-run median. At the sector level, JPM China consumer analyst notes that the situation is less negative than fea