Investors are recommended to gradually buy and accumulate travel stocks as the permanent visa-free arrangement between Thailand and China could drive the number of Chinese visitors to rise by 57% this year, with total foreign arrivals reaching 33 million, according to analysts.
Effective from March 1, visas are not required for citizens of Thailand and China visiting the two countries.
The reciprocal visa-free scheme, announced by Prime Minister Srettha Thavisin on Tuesday, comes after Thailand in September waived visas for Chinese tourists until this February.
Daol Securities expects the pact to be positive for tourism stocks, encouraging more Chinese to travel here.
The brokerage said tourism stocks, especially hotels, should be the main beneficiaries, with Erawan Group (ERW), Central Plaza Hotel (CENTEL), Minor International (MINT) and S Hotels and Resorts among the top picks.
"This is the first time China granted visa exemptions to Thai tourists," Daol said in a research note, with the dual measure expected to support aviation stocks such as Asia Aviation (AAV), Airports of Thailand (AOT) and Bangkok Aviation Fuel Services.
The brokerage set a target price for AAV at 2.70 baht, noting Chinese tourists accounted for 25% of the airline's customers.
The recommended price for AOT is 79.00 baht, with profit in the first quarter of 2024 growing both year-on-year and quarter-on-quarter.
Daol Securities recommends investors buy ERW at 6.50 baht as 88% of the company's income derives from domestic hotels, with revenue from Chinese tourists accounting for 12%.
The target price of MINT is 40 baht based on revenue per available room in October and November, which continued to grow well even with the low season in Europe. Profit for the fourth quarter of 2023 is projected to grow both on a yearly and a quarterly basis.
Trinity Securities recommends buying ERW at 6.60 baht per share and CENTEL at 48.75 baht. The sector's top pick is ERW because its revenue from domestic hotels is as high as 90%, said the brokerage.
While CENTEL derives roughly 80% of its revenue from domestic hotels, Chinese tourists generate more than 30% of its total revenue.
CENTEL should also gain from its restaurant business, that will grow well as tourist numbers surge, noted Trinity.
The brokerage estimates there were 28 million foreign arrivals last year, slightly higher than the forecast of 27.5 million and a significant increase from 11 million in 2022.
Foreign arrivals this year are projected at 33 million, up 18% from 2023, with Chinese tourists amounting to 5.5 million, up 57% from 3.5 million last year, said Trinity.