Source: Lianhe Zaobao

2023-01-25 05:00

The return of Chinese tourists after reopening is injecting a boost into the Asia-Pacific consumer market. As the global economy faces challenges, analysts are optimistic about the long-term development of the local consumption stock, especially the essential consumer goods sector, which has greater resilience during economic downturns.

Part of the change in stock prices of consumer stocks over the past month (in %)

Over the past month, the MSCI Asia Pacific Index, which measures the performance of large-cap stocks in the Asia-Pacific region, has risen 6.39%. Compared to other regions, the Straits Times Index in Singapore has only risen 0.83%, but the FTSE ST Non-Essential Consumer Goods Index and Essential Consumer Goods Index outperformed the Straits Times Index, rising 3.36% and 0.44%, respectively.

uSMART Securities (Singapore) Pte. Ltd market strategist, James Ooi, said that the local consumption market is expected to be boosted by the return of Chinese tourists, which will have a positive impact on consumption stocks in the long run. Since stock prices tend to move ahead of news, the stock prices have already started to rise since November of last year when the market expected China to reopen. In the short term, stock prices may decline temporarily due to overbuying, but after China fully implements its border reopening, the overall market sentiment will continue to improve and the rebound in consumer stocks may last longer than expected.

FSMOne.com's Senior Investment Portfolio Manager, Mr. You Wei Ren, said that the friendly attitude of our country towards tourists will attract them to visit, unlike Japan, South Korea, and some other countries that have implemented entry controls. The increase in tourists will undoubtedly have an immediate impact on the local tourism and consumer markets in the short term.

It is suggested that investors consider more defensive stocks.

However, You Wei Ren pointed out that this short-term boost will be weakened by the slowing global trade and China's increase in consumption tax this year. Local consumers may have already consumed in advance to avoid the consumption tax hike. He noted that local consumer spending has already slowed down this year.

You Wei Ren suggests that investors consider stocks with more defensive characteristics. He says that in an uncertain economic environment, essential consumer goods may be more resilient, such as supermarket operators such as Sheng Siong and Dairy Farm International, as well as coffee shop operator Kimly Group, which are relatively less affected by economic fluctuations.

Emperador and ThaiBev, although also essential consumer goods, have a higher degree of consumer discretionary spending and sales are easily affected by the economic environment. In addition, wine and beverage manufacturers are also facing high cost issues, which are not conducive to the sales and profits of enterprises.

Huang Jia Ren believes that ThaiBev is a direct beneficiary of China's opening up, and the brand effect can allow the group to pass on the rising costs to consumers.

Tan Ying Ying, Chief Stockbroker of Hui Li Securities, says that Kimly Group has won many Muslim customer groups through its Tenderfresh halal brand, driving last year's revenue growth. The group has a strong cash flow and added eight coffee shops last year, with a stable business. However, the rise in labor and raw material costs will affect the group's profit margin. In addition, 80% of the group's shares are concentrated in the hands of a few people, which is another potential risk.

The stock of Emperador has just been selected into the Hang Seng Index after listing on the second board of the SGX in July last year, said Tan Ying Ying. The company's fundamentals are good, with adequate cash flow and a significant reduction in the debt-to-equity ratio last year. However, the biggest problem for the company is the cost pressure caused by inflation, which is particularly evident in its cognac business. Investors must always keep an eye on the price of raw materials.

Compared to stocks of essential goods, stocks of non-essential goods, such as restaurants, will be more greatly affected as consumers reduce spending, said You Wei Ren. Although China has been opened up, flights are limited and tickets are expensive, so Chinese tourists may not return so soon.

Tan Ying Ying believes that with the full lifting of the ban in China, the influx of tourists will continue to drive the business of local catering operators. The Jumbo Group has been continuously repurchasing its shares in the past month, indicating its confidence in the growth of its business.

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