China’s unwinding of its strict Covid-19 controls has got analysts scrambling to identify reopening beneficiaries in the stock market. Much of Wall Street’s research has centered on China-based companies that are directly exposed to the reopening, such as those in the hospitality, airline, and food and beverage sectors. Unsurprisingly, these stocks have rebounded strongly on renewed investor interest. “China has reopened, and consumer stocks are flying, with some up 40% since the November 2022 lows. Much of the low-hanging fruit has already been picked, but reopening will not re-float all consumer sector boats by the same scale or at the same pace,” HSBC ‘s analysts, led by Lina Yan, wrote in a research note on Jan. 13. Likewise, UBS said in a Jan. 20 note that individual stocks in certain key sectors related to reopening themes such as domestic consumption and travel have benefitted disproportionately, such as restaurant chain Haidilao and Trip.com , which have risen 70% and 60%, respectively, since the easing of pandemic restrictions. Investors looking for entry into these stocks may find them unpalatable at current valuations. But there could be another way to play the reopening, with Bank of America and UBS having identified a raft of less obvious beneficiaries outside of China. UBS’ stock picks Thai hospitality group Minor International is one of UBS’ top picks. “Thai hotels are the obvious choice and thus they have rallied hard. But within the hospitality space we still believe Minor International to be the less obvious choice, given higher exposure to Europe versus peers,” the bank said. UBS estimates that 15% of the group’s revenue is directly linked to the relaxation of China’s Covid restrictions via its hotel portfolio in Thailand and restaurant business in China. Within Thailand, UBS also named rail transit operator BTS Group, expressway and metro operator Bangkok Expressway & Metro, as well as Bangkok Bank as reopening beneficiaries. More than 5 million Chinese tourists are expected to visit Thailand this year, according to estimates from the Tourism Authority of Thailand. A study by Goldman Sachs suggests that Thailand may benefit the most from the international tourism channel if China removes visa restrictions and outbound travel gradually normalizes. Hong Kong was the only other destination named in the study. Thailand is seen as a viable destination for vaccine tourists, and the country ranks among the top destinations that the Chinese are keen on traveling to. Singapore-based real estate giant CapitaLand Investment is another of UBS’ top picks. “We think China’s path to normalization through 2023 should benefit CapitaLand’s onshore funds platform… Management had previously alluded to 5 billion Singapore dollars [$3.8 billion] of potential China divestments that had to be deferred due to the restrictions. We also expect the group’s lodging business in China, which has yet to turn around, to demonstrate a strong recovery,” the bank said. UBS also named CapitaLand China Trust in its list. The real estate investment trust invests in several retail, office, and industrial properties in China, Hong Kong, and Macau. UBS noted that previously feared risks of tenant rebates and pre-termination of leases should subside with reopening, while leasing activity for its new economy assets should also improve. The bank also likes Australia-based Platinum Asset Management . The fund manager’s investment performance has benefited from being the most exposed to Chinese stocks relative to its peers, according to UBS. Student placement provider IDP Education, as well as property groups Lendlease Group and Mirvac Group also made the UBS list. Bank of America’s picks “China’s relaxation of COVID rules may provide opportunity for investors to gain exposure to Reopening Products including amusement centers, full-service restaurants, airlines, petrol stations, travel services, and more,” Bank of America’s strategist Girish Nair wrote in a research note on Jan. 23. The bank’s screen for global stocks with significant revenue exposure to reopening products turned up energy firms such as Halliburton and Phillips 66 , airlines such as American Airlines and United Airlines , retailers such as Dick’s Sporting and Fast Retailing , and Samsung SDI . — CNBC’s Michael Bloom contributed to reporting
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