As the coronavirus forces countries to keep their international borders largely sealed, Joohee An is counting on the enthusiasm of local Chinese travelers and betting on stocks linked to a potential revival in domestic tourism.
“They still want to travel,” An, whose $891-million Mirae Asset Asia Great Consumer Equity Fund has beaten 96% of its peers over three years, said of the Chinese in an interview. As the pandemic stabilizes, it will unleash the pent-up demand for travel within the country, and the government has every incentive to boost tourism to support consumption, she said.
Her fund has recently added Galaxy Entertainment Group Ltd. — a casino and hotel operator in Macau — among its top 10 holdings, which also include China Tourism Group Duty Free Corp. and Shanghai International Airport Co., according to the latest fact sheet as of end-June. The China-heavy fund has returned an annualized 10.5% over three years, data compiled by Bloomberg show.
With economies around the world seeking to swing back into action from virus-induced restrictions, governments in countries from Japan to Thailand have been looking at ways to promote domestic tourism and help quicken the economic recovery. China earlier this month said it will allow tour agencies and online tourism companies to run local group tours and hotel bookings across provinces, while Macau also eased some travel restrictions for visitors from the mainland.
“If people feel more secured and safe in domestic areas like Hainan and Macau, they can go,” Hong Kong-based An said in last week’s interview. “If the pandemic situation in China could be like Taiwan, which had zero new cases for months, then domestic tourism is going to have more upside.”
However, An’s optimism could be tested by a resurgence of the virus in some parts of China. The nation on Monday reported the most domestic infections in more than four months as it battles outbreaks in its western and northeastern regions.
Further, shares of some companies have already skyrocketed. China Tourism Group has more than doubled since the end of May amid the unveiling of new duty-free policies by the Hainan government.
But An is cognizant of that and believes that analysts will continue to revise up their profit estimates for the company, which will justify its high valuation for the coming years.
The de-regulation came at a larger-than-expected scale, she said, commenting on the stock’s rally. “I would keep the name in the fund rather than sell the whole position,” she added.
Her fund is also betting big on e-commerce players, with Alibaba Group Holding Ltd. and Tencent Holdings Ltd. being two of the top three holdings. Stocks in this sector have been among the world’s best performers this year as the pandemic compelled masses to stay at home, helping trigger a boom in online shopping.
An also sees upside for providers of online health-care services and some companies in the education sector.