How You Can Profit from Increased Travel in China for Lunar New Year
By George Leong for Daily Gains Letter |
If you have ever been on the New York City subway during the morning or after-work commutes, you’d understand how busy it gets. Surprisingly, it’s still pretty lax compared to rush hour in Hong Kong, Beijing, or Shanghai. And when it comes to Tokyo, well, that’s just a whole other level of busy.
Just a few days ago, we entered the busiest period of the year for travel in China, with the Lunar New Year that began last Thursday, marking the Year of the Goat (a sign of prosperity).
So while China is dealing with a stalling economy and disappointing consumer spending, the current travel period is characterized by the masses going home or visiting family and friends. And that means lots of travel via the roads, rails, and skies.
Chinese Lunar New Year Busy Time for Travel Stocks
This 40-day period in China, commonly referred to as “Chunyun,” will witness tens or even hundreds of millions of people seeking travel arrangements. In all, there will be billions of passenger trips taken.
Roads will be congested with millions of cars in an already-packed road system. Trains, the most popular of the travel options in China, will see millions of riders. And the skies will be filled with thousands of planes, or about 40 million flights, according to the Civil Aviation Administration of China.
Add to this the fact that the travel sector in China is massive and expected to continue to grow as the wealth levels rise, especially in the rural areas, and you’ve got an interesting sector for American investors to consider.
Transportation Stocks to Benefit from China’s Lunar New Year
One of the busiest rail routes in China is operated by Guangshen Railway Company Limited (NYSE/GSH), which has a current stock price of $24.47 and a market cap of $3.49 billion. The company runs the busy rail connecting the southern cities of Shenzhen and Guangzhou to the north. These are two key economic and manufacturing hubs that link up about 25 million people living in the two cities. Guangshen also operates the always-busy Hong Kong Through Train passenger service in conjunction with MTR Corporation in Hong Kong. I have traveled on this MTR system, and I admit it’s extremely busy, but it’s efficient.
Chart courtesy of www.StockCharts.com
Guangshen is the kind of interesting stock that could offer investors a play on the railroad commuter business with above-average upside potential, based on my stock analysis.
Lodging Stocks to See Increased Business, Too
Of course, once these millions of travelers arrive at their destinations, they’ll likely require a place to sleep (unless they’re willing to squeeze in with 10 other relatives in a too-close-for-comfort home).
One of my favorite must-watch hotel plays in China is the value-oriented China Lodging Group, Limited (NASDAQ/HTHT), which has a stock price of about $22.32 and a market cap of $1.39 billion. Investors can consider China Lodging the “Super 8” or “Comfort Inn” of China.
Chart courtesy of www.StockCharts.com
China Lodging runs more than 2,000 high-quality, conveniently located, and reasonably priced hotels from economy to mid-scale. The company just entered into a venture with France-based hotel operator Accor to help the French hotel expand into China.
Revenues are estimated to grow 19.5% in 2014, followed by 11.8% this year, based on data from Thomson Financial. The stock is struggling at this time, but it may be considered the kind of stock that may be a good investment opportunity on price weakness.
With the expected increase in travel and the seemingly ever-rising wealth levels of consumers in China, investors may consider a play on the travel-related sectors in China through American-listed Chinese stocks or American companies that conduct business in the region.
Gong hei fatt choi! Wishing you a very happy and prosperous new year!
Tags: china lodging group stocks, china new year, guangshen railway company limited, NASDAQ, NYSE, travel stocks
