(Yicai) Oct. 28 -- Signs of a recovery are starting to emerge in sectors such as e-commerce and retail as China’s economic stimulus policies gradually take effect, according to the head of China internet research at UBS Investment Bank.

High-end retail did well during the Golden Week holiday around National Day last month, boosted by mall activities and coupon promotions that stimulated consumption, Kenneth Fong told Yicai today. The country’s tourism sector also logged growth of around 6 percent during the period, Fong said.

While advertising and recruitment are still languishing, Fong noted there is usually a lag in recovery for these sectors of about one or two quarters after the overall economy picks up. 

Earnings at internet firms have gradually stabilized, Fong noted. The industry is trading at an average price-to-earnings ratio of around 15 percent, and earnings per share may grow by about 16 to 17 percentage points over the next two to three years, with industry valuations set to continue rising.

Fong also highlighted opportunities for e-commerce in areas such as local groceries and cross-border shopping, where penetration rates are still relatively low. The leading platforms are trying to develop cross-border e-commerce not by cutting prices to boost orders, but by reshaping the supply chain and improving efficiency to raise profit margins, he said.

Fong said companies with strong profit potential, such as platforms and content-based internet companies, remained good stock picks for investors. He said firms with narrow profit margins or those just turning a profit are worth a look, as are those with low valuations.

Editor: Tom Litting