China’s worst-performing big-cap stocks this year are not found in the ruin of the technology sector sell-off. In Shanghai, that dubious distinction goes to Shanghai International Airport Co, the airport operator whose stock has slumped to the lowest level since October 2018 as foreign funds like the Capital Group and Invesco bolted. The firm, which manages the Pudong and Hongqiao airports as well as duty-free shopping space, survived 2020 with only a 3.9 per cent dent to its share price. This year, however, its market value has shrunk by 58.6 billion yuan (US$8.8 billion), as the stock’s 40 per cent tumble exceeded that of all Hang Seng Tech Index’s members , bar one mini-cap firm. In operations, the company has struggled to rebound from a squeeze in air traffic and income. The vaccination drive, meanwhile, is reviving domestic tourism and fuelling onshore duty-free spending again, but at outlets in Hainan and elsewhere run by competitors like China Tourism Duty Free Group. “Non-aviation revenue will continue to be under pressure this year, given that the global pandemic will make it difficult to fully reopen borders,” said Gu Ximin, an analyst at Minsheng Securities in Shanghai. “We are cautious, given the uncertainty about the recovery in the load of international tourists.” Foreign investors are getting out. Overseas traders sold 72.2 million shares in Shanghai Airport through the Stock Connect link last quarter, reducing foreign ownership to just under 10 per cent, according to data compiled by Shanghai DZH. That was the lowest in almost six years, and halved from pre-pandemic days. The Capital Group, based in Los Angeles with US$2.2 trillion of assets under management, trimmed its holding by 51.3 million shares to 18.4 million, according to Bloomberg data, based on an April 26 filing. Invesco also reduced its positions in a May 7 filing. Shanghai Airport lost 436.4 million yuan in the first quarter, on top of its 1.38 billion yuan annual setback in 2020. The slide last week made Aeroports de Paris the most valuable airfield operator globally. More pain may be in store for shareholders as analysts at Haitong Securities, Minsheng Securities and Southwest Securities lowered their stock ratings and earnings forecasts. A January deal with duty-free goods retailer Sunrise to peg floor-space rents to international tourist traffic volume could cut revenue from the segment by one-third over the next five years, Haitong Securities estimated. “Its bargaining power for rentals is weakening because of the uncertainty in the recovery in international tourist traffic,” said Chen Zhaolin, an analyst at Southwest Securities. There is also the emergence of new channels of duty-free shopping to contend with, he added. Rents from duty-free shopping space contributed 48 per cent to group revenue in 2019, up from 40 per cent in 2018. In 2020, they fell 78 per cent to 1.16 billion yuan. With just 92 million yuan in the first quarter this year, the crash has quickened the exodus of foreign funds. Besides, Beijing’s move to triple the amount of tax-free products tourists can buy in Hainan island has eroded Shanghai Airport’s dominant position as the premier venue for cheaper cosmetics, wines and cigarettes. The policy change, the rise of cross-border e-commerce platforms and lower duties have taken some of the duty-free shopping force from the airport channels, chairwoman Shen Shujun said at an earnings briefing last month. All these factors chipped away at Shanghai Airport’s competitive edge, she added. China Tourism Group Duty Free, which operates a store in Hainan, has more than tripled in value over the past year. Its first-quarter profit surged almost 25 fold from a year earlier, reflecting a spike in sales. Still, there is hope for the battered travel industry. A US backing for waiver on patent and protection rights for Covid-19 vaccines could help with more reopening of economies, while “travel bubble” plans brighten the outlook. Optimists pegged the stock price target at 61.28 yuan in 12 months, a 35 per cent upside from Friday’s close of 45.27 yuan. Patience may yield results, according to China International Capital Corp (CICC), which maintains a neutral rating on Shanghai Airport stock. While aggregate take-offs and landings in the second quarter at Shanghai Airport could rebound to 78 per cent of the level of the same period in 2019, international flights will still be in the doldrums in the near term, it said. “It still takes time for the data to improve and there’s a lack of flexibility regarding duty-free revenue,” said Zhao Xinyue, an analyst at CICC in Shanghai.