00753 Overview

Market Performance: The HSI fell by 2.1% to close at 26,059, with significant declines in the HSCEI and HSTECH, while total market turnover reached $357.679 billion.

Oil and Gold Stocks Rise: Oil prices increased, boosting stocks like PETROCHINA and CNOOC by over 4%, while gold prices also rose, positively impacting companies such as SD GOLD and ZHAOJIN MINING.

Airlines and Financials Decline: Airlines faced losses due to disruptions in Middle East routes, with CHINA SOUTH AIR and CHINA EAST AIR dropping over 8%, while major financial institutions like HSBC and BOC HONG KONG also saw declines.

Chinese Developers and Insurers Struggle: Chinese developers like SUNAC and CHINA VANKE experienced significant drops, while insurers and brokers also faced losses, reflecting broader market concerns.

Spring Festival Tourism Growth: Domestic tourist volume in Mainland China increased by 19% YoY to 596 million trips, with tourism spending also rising by 19% YoY to RMB803 billion, while outbound tourist volume grew by 24% YoY to 4.8 million trips.

Hotel and Airline Performance: The hotel industry saw mid to high single-digit percentage growth in RevPar, and airline ticket prices exceeded expectations, with domestic routes up 7% YoY and international routes up 15% YoY.

Macau's Gaming Revenue: Macau's average daily gross gaming revenue (GGR) was MOP786 million, a 5% YoY increase, but fell short of the expected MOP850-900 million due to a lower-than-normal VIP win rate.

Investment Outlook: Goldman Sachs highlighted favorable fundamentals for Buy-rated hoteliers and Macau casinos, as well as airlines, indicating potential growth in these sectors.

Airline Industry Outlook: Morgan Stanley predicts a multi-year cyclical improvement in the airline industry, gaining momentum in 2026-2027 due to increased demand, despite low investor confidence.

Target Price Increases: The broker raised target prices for the airline sector by an average of 42% and upgraded the A-shares of three major airlines to Overweight.

Passenger Load Factor Improvement: An estimated annual improvement of 1-2 percentage points in the passenger load factor (PLF) suggests stronger pricing power for airlines.

Optimistic Profit Margin Potential: Morgan Stanley maintains an optimistic view on the supply-driven upcycle for Chinese airlines, indicating potential upside for profit margins if pricing exceeds expectations.

Tourism Industry Growth: The tourism sector is increasingly aligned with China's goals for enhancing well-being and happiness, with projections indicating domestic tourism consumption will rise from 13% in 2023 to 18% by 2030, contributing significantly to GDP growth.

Revenue Projections: Morgan Stanley forecasts that the tourism industry's revenue will reach RMB12 trillion by 2030, with its GDP contribution increasing from 4.8% in 2024 to 6.7%.

Investment Recommendations: Investors are encouraged to capitalize on the growing tourism demand, with Morgan Stanley highlighting five key stocks, including AIR CHINA and TRIP.COM-S, as potential beneficiaries.

Market Insights: The report also notes the short selling activity and market performance of the recommended stocks, indicating investor sentiment and market dynamics within the tourism sector.

Capacity Investment: AIR CHINA plans to upgrade its capacity for the 2026 Spring Festival travel rush, increasing its registered aircraft by 25 year-on-year and operating over 70,000 passenger flights, a 10.1% increase from the previous year.

Flight Schedule: The airline will average approximately 1,800 flights daily, which is an increase of 160 flights year-on-year, focusing on key routes in major city clusters across China.

Airline Ticket Policy Update: Air China, China Eastern Airlines, and China Southern Airlines have announced a new policy allowing free changes or refunds for tickets issued before January 26, 2026, for flights to, from, or transiting through Japan.

Initial Policy Scope: The free change and refund policy was initially limited to flights scheduled before March 28, 2026, but has now been expanded to include a broader range of tickets.