Singapore Stocks: How They’re Cashing In on China’s Travel Boom

May 15, 2023

Data from China-based Group shows a significant surge in both domestic and international travel bookings, reflecting an upward trend during China’s increasingly popular May Day holiday.

In comparison, between the Chinese New Year holiday (January 21 to 27) and the May Day holiday, data from the online travel platform highlighted remarkable growth in travel bookings.

Specifically, flight reservations from China to Southeast Asian nations soared by 91%. Notably, bookings for flights to Japan and South Korea jumped by 120% and 204% respectively, while long-haul travel bookings to Europe experienced an increase of over 40%.

The top ten most sought-after overseas destinations during this holiday period were Thailand, Japan, South Korea, Singapore, Malaysia, the US, Indonesia, Vietnam, Australia, and the UK.

This suggests strong demand in travel as China reopens.

I believe that this also provides opportunities for investors to invest in Singapore’s travel-related stocks including airlines, hospitality, and tourism services.

Here are some key reasons why.

China was Singapore’s largest inbound market before the pandemic

Before the pandemic struck, China was Singapore’s most significant source of inbound tourism. The anticipated return of Chinese travellers in 2023 is set to reinvigorate Singapore’s travel-related sectors.

Leading indicators also suggest an imminent, swift, and extensive recovery in Chinese travel demand. Although the resurgence will be from a relatively low base due to the previous travel restrictions, it’s expected to be dynamic and robust.

As the numbers of Chinese visitors increase and international flight capacities expand, Singapore is projected to witness a consistent influx of over a million visitors each month for the remainder of the year.

The strong recovery is in line with the Singapore Tourism Board’s (STB) forecast of 12 million to 14 million international visitors in 2023 with a full tourism recovery expected by 2024.

Benefits to airlines

The reopening of China spells good news for airlines, with the pent-up demand for travel likely to boost passenger numbers significantly.

Singapore Airlines Ltd (SGX: C6L), the nation’s flag carrier, is poised to reap substantial benefits from the resumption of flights to and from China.

Singapore Airlines, or SIA for short, has emerged as a major beneficiary of the reopening of international travel.

This was reflected by the recovery in its share price as well as the sharp increase in its passenger traffic.

With the full reopening in China, this will benefit SIA as one of the reasons why a complete recovery of Chinese tourists could not happen this year was due to limited flight capacity.

This shows the strong demand for its services.

One of the key downsides is the inflationary pressure that could hurt demand and operating margin for the aviation company.

Positive impact on the Singapore hospitality sector

Hospitality trusts and hotel operators like CDL Hospitality Trusts (SGX: J85) and CapitaLand Ascott Trust (SGX: HMN) also stand to gain from the influx of Chinese tourists.

With the resumption of tourism, these companies are expected to see an increase in occupancy rates, driving up their revenues and, in turn, their stock prices.

CDL Hospitality Trusts is one of Asia’s leading hospitality trusts with assets under management of about S$3.1 billion as of 31 March 2023.

Meanwhile, CapitaLand Ascott Trust, formerly known as Ascott Residence Trust, is the largest lodging trust in Asia-Pacific with an asset value of S$8.0 billion as of 31 December 2022.

Its objective is to invest primarily in income-producing real estate and real estate-related assets which are used (or predominantly used) as serviced residences, rental housing properties, student accommodation and other hospitality assets in any country in the world.

CapitaLand Ascott Trust was featured as one of the 5 top stocks to buy in May 2023.

Boost for tourism services

The reopening of China is also likely to give a much-needed boost to companies offering tourism services.

For example, ComfortDelGro Corporation Limited (SGX: C52), which provides taxi services and sightseeing tours, could see a surge in demand.

Similarly, Resorts World Sentosa and Marina Bay Sands, two of Singapore’s major tourist attractions, are likely to see an increase in visitors, leading to an uptick in their revenues.

This will benefit Genting Singapore Limited (SGX: G13), which has just reported an increase in its net profit by three times during the first quarter of this year.

The return of tourists from China will boost recovery further in the second half of this year.

Ride the wave of short-term recovery and think long term

With the reopening in China and strong pent-up demand in travel, there‘s a rush of excitement and optimism in the market, making it an opportune time to invest in Singapore’s travel-related stocks.

While the short-term recovery is certainly enticing for investors, the long-term potential of Singapore’s travel-related stocks is equally, if not more, promising.

Singapore’s position as a strategic travel hub is likely to strengthen as global travel volumes recover to pre-pandemic levels and continue to grow.

Its shift towards sustainable tourism and its growing reputation as a luxury destination also augurs well for high-end hospitality and tourism services.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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