International travel is a time-tested way for newly minted middle classes to enjoy their wealth. Increased tourism also reduces the export imbalance and makes people happy — two stated goals of the Chinese central government. Asia’s travel sector should therefore be a bright spot in the recent market rout.
Yet domestic stocks are struggling to benefit from the trend. Travel booking website Ctrip has done well in its purchase of Scottish-based travel site Skyscanner. Sales there are up around 30 per cent a year since 2016. But the lasting effect of a domestic scandal is still weighing on shares. Meanwhile airlines such as Air China and China Southern have borrowed heavily in dollars and must contend with weakness in the renminbi.
Investors are better off concentrating on where Chinese tourists want to go and where they will spend their money. Duty-free shops operator Dufry is well placed — with little competition in airports. The group’s net income grew 18 per cent a year in the past three years. Asia is its fastest-growing market.