Chinese Travel Giant Trips Up Investors


Strains are emerging in Chinese tourism as economic growth slows and the currency weakens.

Asia Markets Snapshot

  • Hong Kong’s benchmark Hang Seng Index fell 2.3%
  • The Shanghai Composite lost 1.2%; indexes in Tokyo and Seoul fell less sharply.
  • China set a weaker midpoint for yuan trading at 6.9329 per dollar

What’s Happening

Shares in

Ctrip.com International
Ltd.


CTRP -19.02%

, China’s largest travel agent, hit their lowest since March 2015 in Thursday trading in New York. The stock fell 19%, its biggest one-day drop in its nearly 15-year history, to $27.89. The shares have now lost 36.6% this year.

Ctrip and 45%-owned affiliate Qunar together boast more than half of China’s online travel market, making it a key barometer of the country’s tourism industry. Ctrip has a market value of more than $15 billion, and U.S. counterpart

Booking Holdings

owns a small stake.

In a conference call on Thursday, Ctrip Chief Financial Officer Cindy Xiaofan Wang flagged “macro slowdown uncertainties.” The group surprised investors by forecasting operating profit of just 0% to 1% of sales this quarter, down from a 20% margin in the three months ended September. It attributed the expected weakness to economic sluggishness and factors including higher marketing spending.

The yuan has weakened more than 6% against the dollar this year, while China’s economy is showing signs of weakness. That has rattled a range of travel-related stocks including shares in airlines, hotel operators and travel agents.

Air China
Ltd.

,

China Southern Airlines
Co.

and

China Eastern Airlines
Corp.

have fallen between 37% and 46% this year, Refinitiv data shows, while hotel operator Shanghai Jinjiang International Hotels Development Co. has retreated nearly 29%.

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What It Means

“The weaker economy is a real concern,” said Choonshik Yi, a fund manager at UBP Asset Management Asia Ltd. “It might affect traveling demand and hence, the earnings of online travel agents.”

Ella Ji, head of technology, media and telecoms research at China Renaissance, said since travel spending was a discretionary expense, it could decline if economic growth slows further. International travel could also be hit by a weaker currency, which reduces Chinese tourists’ purchasing power abroad.

Citi analysts including Alicia Yap cut their investment recommendation on Ctrip to “neutral” from “buy” and slashed the target price by 15% to $35.00 a share.

Write to Joanne Chiu at joanne.chiu@wsj.com



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