Yesterday, Jing Travel covered the news about Hainan being developed into a new, travel-oriented free-trade zone. Unsurprisingly, stocks associated with Hainan, particularly those with the province in their name, were on the uptick yesterday as well. The companies that rose sharply are involved in a variety of industries, from infrastructure, tourism, to real estate. While it’s likely that Hainan becoming a free trade zone will ring substantial growth in revenue to Hainan businesses, it’s still unclear how exactly the new free-trade zone will develop going forward. Although, with the focus on leisure travel, it seems that travel companies, hospitality, and retail companies stand to gain the most.
Hainan stocks jumped after the news of the island’s travel free-trade zone, even if the companies in question didn’t have any connection to tourism
Of course, not all of the companies whose stocks rose in price are directly related to the tourism industry, or even stand to benefit much from increased tourism to Hainan.
The Wall Street Journal noted that “Hainan Yedao Co., China Hainan Rubber Industry Group, Hainan Mining Co., and Hainan Haiqi Transportation Group Co. rose 10% on the Shanghai Stock Exchange minutes after the market opened on Monday.”
China Hainan Rubber Industry Group is, as its name implies, a firm that focuses primarily on the processing of natural rubber and the production of rubber goods. Hainan Mining Co. is mainly engaged in the mining of iron and steel production. It seems unlikely that these three companies stand to benefit much from increased tourism to Hainan Province and that the primary reason that their stocks rose was simply name association.
The company that stands to benefit most, HNA Group, may be too debt-burdened to fully capitalize on this opportunity
Of course, Hainan Haiqi Transportation Group Co. is involved in passenger travel and logistics, both of which will likely be in higher demand in Hainan in the coming years. Moreover, Hainan Yedao’s specialty food products and liquors may prove popular with tourists, and the company’s real estate properties may increase in value as well.
Ironically, the one company that stands to benefit the most from a tourism-oriented free trade zone on Hainan Island is HNA Group, primarily through its subsidiary Hainan Airlines. Hainan Airlines is headquartered in Haikou, Hainan and the city is one of the airline’s core hubs, along with Beijing. This comes at a time when HNA Group is struggling to survive and its debt troubles are beginning to affect Hainan Airlines directly.