I think these 3 ASX shares could benefit from a Chinese tourism boom

It could soon be a good time for businesses that are involved with Chinese visitors.

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Key points

  • A2 Milk could benefit if Chinese daigou buyers return with the Chinese tourists
  • Idp Education’s earnings could get a boost if Chinese students start returning in large numbers
  • Auckland Airport may benefit from an influx of Chinese air passengers

The ASX share market could soon offer up a few opportunities as China reopens its borders and lessens travel restrictions on its citizens.

China had been living through lockdowns to limit the spread of COVID-19. But, now restrictions are being rapidly and widely removed.

According to reporting by media, including CNBC:

China's National Health Commission announced late Monday that starting Jan. 8, inbound travellers would no longer need to quarantine upon arrival on the mainland, ending a policy of nearly three years.

Authorities also said they would allow Chinese citizens to resume travel, without providing details on timing or process.

During the pandemic, Beijing prevented Chinese citizens from getting passports or leaving the country unless they had a clear reason, typically for business.

CNBC also reported that within half an hour of China's announced policy change searches for travel abroad surged to a three-year high, according to Trip.com Group. Australia was one of the top 10 destinations outside the mainland with the fastest-growing search volume.

If there's going to be a deluge of Chinese visitors returning to Australia's shores, then there may be a few ASX shares that could noticeably benefit and get an earnings boost.

A2 Milk Company Ltd (ASX: A2M)

The A2 Milk share price has gone on a good run in 2022 – it's up more than 20% to date.

But, it's still down around 65% since early July 2020.

One of the main problems for the company has been a large reduction in infant formula buying by daigou. If Chinese tourists return to Australia to pre-COVID levels, it could get a good boost.

Remember that in FY21, A2 Milk saw revenue sink 30.3% to $1.21 billion, while net profit after tax (NPAT) dropped 79.1% to $80.7 million. I'm not suggesting that all of A2 Milk's lost earnings will suddenly return, but I do think Chinese tourists could be a boost for the business.

Idp Education Ltd (ASX: IEL)

The student placement and international English language testing business could benefit from a return of Chinese students. Remember, in FY19 the ASX share generated $104.3 million of revenue for students in Australia. In FY22 this figure was only $81.8 million.

If Chinese students return to Australia (and other destinations that Idp Education services), then its revenue and earnings could get a useful boost.

With how much operating leverage the company has, new revenue could translate into a much larger increase in net profit, potentially boosting the Idp Education share price.

Auckland International Airport Limited (ASX: AIA)

New Zealand used to see hundreds of thousands of visitors from China each year. But when they stopped coming, Auckland Airport lost a good portion of its earnings.

In the monthly update for October 2022, the business noted that total passenger numbers were only 72% of pre-COVID times, with Chinese visitors only being 13% of the pre-COVID total.

If Chinese visitors return to close to pre-COVID levels, it could be a real boost for the ASX share's earnings. However, it was more than just Chinese passengers that made up passenger numbers, so we may need to see passengers from other countries recover as well.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Idp Education. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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