Tourism-related equities to show buoyant gains when event kicks off

BEIJING - Shanghai hotel, catering, transport and retailing shares are expected to gain further momentum during the 2010 World Expo, thanks to the huge number of visitors, analysts said.

"The six-month-long expo will attract much higher passenger volume to the city than the Beijing Olympics, and related listed firms in Shanghai will undoubtedly gain ground," said Zhang Fan, a strategy analyst at Tebon Securities based in Shanghai.

Counting on much expected rosy interim earnings buoyed by the Expo, tourism-related shares including hoteliers, restaurants, metro and airport operators, as well as retailers will show buoyant gains when the Expo kicks off on May 1, Zhang said.

Figures from online travel agency Ctrip.com International Ltd showed that Shanghai's hotel prices jumped 20 percent over the past month, and will continue to rise.

Shanghai's 2010 Expo, the country's biggest event since the 2008 Beijing Olympics, is expected to attract 70 million visitors from home and abroad in the six months ending on Oct 31 to become the largest ever event of its kind.

According to a report from Citic Securities, 30,000 rooms had been booked for the Expo period by the end of February, eight times higher than a year earlier.

Room prices for May and June in most Shanghai-based star-rated hotels cooperating with Ctrip rose about 20 percent on average.

The report also showed the tourists' catering expenditure during the Expo is expected to reach 45 billion yuan.

The Expo sector that covers 23 stocks plunged 1.9 percent on Wednesday, as the benchmark Shanghai Composite Index edged down 0.26 percent to close at 2900.33.

The sector has accumulatively dropped 2.59 percent since the beginning of the year, when the major gauge declined 11.5 percent.

In such a sagging market environment, only firms backed up by strong fundamentals can outperform, said Liu Jiwei, an analyst at Pacific Securities, adding that the service and retail industries may take the lead.

But Liu warned that systematic risk is inevitable and will drag down Expo-related stocks in the short term.

Shanghai Jin Jiang International Hotels Development Co, a State-owned hotelier with 439 budget hotels as of 2009, plunged 7.88 percent to end at 25.24 yuan on Wednesday. It has accumulatively dropped by 3.48 percent in three months.

Jin Jiang International Hotels Development's net profit in 2009 was 334 million yuan, up 2.85 percent year-on-year.

The operator of Jin Jiang Inn will speed up its expansion plan by adding 100 hotels across the country this year, according to Liu Yueping, an analyst at Great Wall Securities. He said that the company's four hotels in the Expo Park have been fully booked from late April to early May, while hotel prices will be raised by 30 percent during the Expo.

"We projected that the Shanghai Expo will add 0.15 earnings per share (EPS) for the company in 2010," said Su Ping, a tourism analyst at China Merchants Securities. The hotelier posted EPS of 0.47 yuan last year.

China Daily

(China Daily 04/29/2010 page17)