Shanghai airport stock survived the pandemic in 2020. Vaccination and foreign fund exodus are now killing it

Foreign ownership of Shanghai International Airport stock reached a six-year low last quarter amid an exodus of big funds

A deal to peg duty-free shopping floor space to international tourist traffic could squeeze rental income as pandemic lingers

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An airport security staff member wearing protective gear, amid concerns over the Covid-19 outbreak, escorts passengers arriving at Shanghai Pudong International Airport. Photo: AFP

Published: 7:30am, 10 May 2021Updated: 7:49am, 10 May 2021

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.