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Japanese and South Korean shares surge on return of Chinese tour groups

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Tourism-related stocks in Japan and South Korea surged on Thursday after China said it would relax pandemic-era restrictions on tour groups travelling to dozens of countries, as investors anticipated the lucrative return of the mass-market visitor.

China’s tourism ministry said on Thursday it was lifting restrictions on group travel to 78 countries with immediate effect. The list included Japan and South Korea — favourite destinations of Chinese tour groups before 2020 — as well as Australia, Germany, the UK and the US.

Before the coronavirus pandemic, Chinese group tours were a boon to multiple sectors and economies. Travellers spent on everything from the highest-end luxury goods to electronic rice cookers, making them among the most powerful forces in retail sales.

In Tokyo, shares in department stores climbed sharply on Thursday, while those of Japan Airport Terminal, which operates the capital’s newly expanded Haneda airport, rose more than 9 per cent. Kyoritsu Maintenance, which runs a hotel chain favoured by mainland Chinese tourists, gained more than 11 per cent.

The term “inbound” jumped to the most searched on Japanese online trading platform Kabutan, displacing “semiconductors” and “generative AI”, in an indication of retail investor excitement.

In Seoul, the impact was even more striking, with shares in Lotte Tour Development surging nearly 30 per cent and those in Paradise Group, which runs casinos that cater exclusively to foreigners, rallying more than 18 per cent. Cosmetics conglomerate AmorePacific rose 7 per cent.

Airline stocks in China, Japan and South Korea, which analysts said were likely to be longer-term beneficiaries of the move, rose between 1 and 5 per cent.

China mostly closed its borders to international travel for almost three years during the pandemic. It has since resumed flights to 62 countries, 10 fewer than before, according to the country’s Civil Aviation Administration.

In a statement, South Korea’s culture and tourism minister Park Bo-gyoon said the resumption of Chinese tour groups would “breathe new life” into the airline and retail sectors damaged by Covid-19.

Despite the euphoria, investors said it was probably too early to expect Chinese tourists to return to pre-pandemic levels and added their spending was likely to be reduced.

“The Chinese are not spending that strongly in their own country right now, as the numbers are showing. I think it may be a stretch to hope they will suddenly resume spending abroad,” said one Tokyo-based fund manager who owns Japanese airline and hotel stocks.

Chinese travel group and airline China Southern added 3.5 per cent and 3 per cent, respectively, but the country’s equities were broadly downbeat, with shares focused on domestic travel tumbling on the prospect of increased competition. China Tourism Group Duty Free fell as much as 6.6 per cent.

Prior to the pandemic, mainland Chinese led an unprecedented tourism boom in Japan. At its peak in July 2019, Japan welcomed just under 3mn overseas visitors a month, more than a third of them from mainland China. While arrivals from Hong Kong, South Korea and Taiwan have rebounded, the Chinese figure has languished, creeping just above 200,000 in June.

While only about 20 per cent of Chinese visitors to South Korea in 2019 were on group tours, which were unofficially banned in 2017 as part of an economic blockade, they are highly valued for outspending their American or Japanese counterparts. According to the Korea Tourism Organisation, the average Chinese visitor spent 42 per cent more than that from the US and more than double that from Japan.

But Steve Cochrane, chief Asia-Pacific economist at Moody’s, warned that spending habits in China had changed during the pandemic as more consumers began buying luxury goods domestically and that confidence remained weak amid underwhelming economic growth.

“The bottom line is we’re probably not going to get back to pre-pandemic levels that quickly,” he said.

Additional reporting by Jung-a Song in Seoul

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