China will reopen its borders to international travellers on 8 January as it moves away from its “COVID-Zero” policy.
While there are concerns on the risks of another COVID-19 infection wave, the world is now better prepared to deal with COVID cases from China.
There is still a significant health risk involved but China’s “Great Reopening” will also bring opportunities that should drive an economic recovery.
In fact, after three years of lockdowns, the Great Reopening could prompt an exodus from its travel-starved public in time for the Lunar New Year celebrations.
So, for investors here are three Singapore stocks that will benefit from China’s Great Reopening.
1. Singapore Airlines
Flagship airline carrier Singapore Airlines Ltd (SGX: C6L), also known as SIA, is expected to report a strong improvement in its earnings for FY2023 amid the return to travel.
China’s Great Reopening will further boost the recovery and allow SIA to maintain its elevated earnings profile.
Following the news of the reopening, Trip.com data showed that outbound flights surged by 254% on 27 December 2022, as compared to a day before.
The top five destinations were Singapore, South Korea, Hong Kong, Japan, and Thailand.
Flight bookings to Singapore jumped 600%.
SIA is not rushing to add flight capacity to China but has stated that it will “continue to monitor the demand for air travel and adjust capacity accordingly.”
2. Genting Singapore
The return of Chinese tourists to Singapore will benefit Genting Singapore Limited (SGX: G13), which owns and operates the Resorts World Sentosa (RWS) Integrated Resort – home to one of only two casinos in Singapore.
Among some of the attractions at RWS are the SEA Aquarium, Universal Studios as well as its casino and luxury hotels.
Prior to the COVID-19 pandemic, Chinese tourists accounted for about 30-40% of RWS’s VIP volume and one-third of RWS’s gross gaming revenue among the mass market.
Singapore’s strong reputation in its management of the pandemic and being one of the first Southeast Asian countries to reopen its international borders has also put the Lion City as one of the top tourist destinations.
With Singapore being the top destination for the return of Chinese tourists, this will benefit Genting Singapore, which has both gaming and non-gaming attractions.
3. DFI Retail Group
While DFI Retail Group Holdings Ltd (SGX: D01) relies massively on its Hong Kong operations to generate the bulk of its revenue generator, China’s great reopening will boost the recovery for the Hong Kong retail company.
The China-Hong Kong border reopening is among the first and this will boost earnings for DFI Retail Group’s earnings, especially in its health & beauty segment.
The Group’s health & beauty segment reported a decline of US$230 million in earnings before interest and tax (EBIT) during the FY2020 amid the loss of Chinese tourists.
The return of Chinese tourists to Hong Kong will benefit DFI Retail Group. That’s because it’s the leader in the health & beauty retail segment in Hong Kong, commanding the highest market share and physical store presence.
China’s reopening could hit some speed bumps
Despite the optimism on the positive impact from China’s great reopening, downside risks remain as the reopening could hit some speed bumps.
However, I believe that the move is inevitable and will benefit Singapore stocks that have exposure to Chinese spending in the travel, tourism, and retail business segments.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
