Malaysia’s Tourism Surge: A Potential Golden Opportunity

09 Jul 2024

By Eric Lee, Sales Director, Phillip Nova

Malaysia is witnessing a robust resurgence in tourism, marked by a 32.5% increase in tourist arrivals in the first quarter of 2024. This uptick is largely driven by strategic initiatives such as the extension of visa-free travel for Chinese tourists until 2025, a critical move given China’s significant contribution to Malaysia’s tourism sector.

– Article from the The Star

The positive trend in tourist arrivals is expected to bring substantial benefits to Malaysia’s aviation and tourism sectors. Enhanced flight connectivity, strategic marketing campaigns, and the improvement of tourism infrastructure are central to sustaining this growth. The increase in tourist numbers translates into higher demand for flights, accommodations, and related services, thus boosting the overall economy.

Capital A Bhd, the parent company of AirAsia, is particularly well-positioned to capitalise on this tourism boom. As one of Asia’s leading low-cost carriers, AirAsia is set to benefit from the increased passenger traffic resulting from the surge in tourist arrivals. The airline’s extensive network and competitive pricing make it a preferred choice for both international and domestic travellers.

The chart above compares weekly share price of Capital A to Malaysia’s Tourist Arrivals number. As can been seen, this economic metric is a major factor to the performance of its share price. Currently, tourist arrivals number had already risen back to pre-Covid level, but this is not yet been reflected onto its share price yet. With the prospect of higher tourist arrivals, especially from China, the company may stand to benefit from this trend.

– Article from China Daily

Key factors contributing to Capital A Bhd’s potential growth include:

Increased Passenger Numbers: With more tourists flying to Malaysia, AirAsia is likely to see a significant rise in passenger volumes. This directly boosts the airline’s revenue and market share.
Strategic Market Positioning: AirAsia’s strong presence in key Asian markets, particularly China, positions it advantageously to tap into the influx of Chinese tourists.
Expansion Plans: Capital A Bhd’s plans to enhance flight connectivity and customer experience align well with the expected growth in tourism. These initiatives are likely to attract more travelers, further boosting the company’s earnings.
Operational Efficiency: AirAsia’s focus on maintaining operational efficiency and cost-effectiveness ensures that it can offer competitive pricing while maintaining profitability.

The stock looks poised for a Bollinger “Squeeze” breakout after 2 months of consolidation. Volume analysis suggest accumulation within range of $0.80-$0.88 and Smart Money chart indicated that institution had been buying since late April.

Traders can use the resistance of $0.88 as signal to buy in should price breaks above, and especially close above $0.88 with higher-than-average volume. Support of $0.79 can be set as cut-loss level if upward momentum fails and price breaks down below support.

In conclusion, Malaysia’s impressive growth in tourist arrivals presents a golden opportunity for Capital A Bhd. The company’s strategic positioning, coupled with the expected rise in passenger volumes, makes it a promising investment for those looking to capitalize on the booming tourism industry.

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An Exchange Traded Fund (ETF) is a marketable security that is formed to track nearly anything, ranging from a specific index, sector, commodity, or increasingly, theme. They are most commonly used to track a basket of stocks, and can typically be accessed through the same channels as regular stocks. ETFs are typically separated into passively-managed ETFs that simply mirror the security they are tracking (e.g. the STI), and actively managed ones that attempt to deliver higher returns or specific investment objectives, often with a pre-specified theme in mind (e.g. ARK Invest’s Innovation ETF).

Why should I trade in ETF CFDs?

ETFs have been growing in popularity over the years. 2020 was the best year for ETFs yet, with global equity ETFs seeing more than $1T in inflows within a 12-month period. Using CFDs to gain exposure to ETFs allows for greater capital efficiency because only a portion of the contract value is required as margin to establish a position.
ETFs are particularly popular with investors seeking a relatively hassle-free investing experience, while desiring exposure to a range of specific and relatively understandable securities. Trading ETF CFDs brings greater convenience by eliminating the need for traders to hold multiple currencies in order to access global ETFs.
An investor wanting exposure to the post-pandemic economic recovery could open a position in the well-known SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500. Another investor that may be convinced of the future importance of Environmental, Social and Governance concerns (ESG) may find the increasing selection of ESG-themed ETFs that track a basket of high ESG-rating companies to be a good investment, rather than cherry-picking individual equities by hand. ETF CFDs can act as a powerful tool for traders can profit from both directions of the market by taking on long or short positions.

A look at two ETF CFDs we offer:

1) Has the ARKK been sunk?

ARK Innovation ETF (ARKK) ARKK is an actively managed ETF by ARK Invest that invests in a range of companies based on their innovative and industry-disrupting potential. ARKK’s largest holdings are in companies such as Tesla, Square, and Zoom. ARKK is down around -33% from peaking on 12^th Feb and is currently in the red for the year to date as the market experiences a risk-off outflow of funds. Superstar fund manager Cathie Wood has however been consistently doubling down on her bets, buying even more shares in growth stocks that are going through their own tumultuous periods such as DraftKings, Peloton, Teladoc, and Tesla. In her view, ARKK is playing the long game, and remains steadfastly convinced in the long-term prospects of these growth stocks beyond this current bout of volatility. Similarly on outflows, investors are still betting big on ARKK as ARK Invest has only lost about $1.2B in assets this year across all its six funds, compared to seeing an inflow of $15.1B during the same period. Recently, investors have been nervously eyeing ARKK’s basket of tech stocks as their future earnings potential remain vulnerable to erosion through high inflation – the dominant concern of the market in recent weeks. As commodities – the major contributor to the recent heightened inflation fears – drops sharply from record highs, are investor concerns over hyperinflation overblown?

2) Searching for exposure to Asian equities?

iShares MSCI Asia ex Japan ETF (AAXJ) The AAXJ is currently trading -10.6% adrift of all-time highs seen in February, giving up gains in tandem with an Asia-wide equity sell-off at the time. Given that slightly over 40% of the ETF’s holdings are based in China, the ongoing tumult seen in Chinese equities currently have carried over nearly perfectly in the AAXJ, as Chinese investors take a breather after the stellar gains made over the past year. Looking ahead, Asia – and particularly China, is steaming ahead with its economic recovery. China is widely expected to be one of the best-performing major economies this year, providing a major boost to the outlook for corporate earnings. As the rest of Asia and the world gradually opens up their own economies, AAXJ is likely to again benefit from strong Asian outperformance amidst a strengthening trade outlook.

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Trade in both the bull and the bear markets
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