BY MIRAE ASSET FINANCIAL GROUP Q3 2016 INDIAN AUTO RIDING ON THE WHEELS OF FORTUNE Global luxury-motorcycle manufacturers are booming in India, thanks to a young generation of affluent thrill seekers. PLUS + CHINESE TOURISM Big Moves, Big Opportunities in the Chinese Tourism Industry BRAZILIAN BUSINESS Food Truck 2.0 VIE TNAMESE START-UPS Vietnam Rolls with Southeast Asia’s Tech Growth EDITOR-IN-CHIEF DUNCAN PARK EDITORS KIM KUK HWA CONTENTS JUNG KIYEON JEFF BACKHAUS ART YANG YOUNG HEE LEE HOO SHIM Q3 2016 LEE HAE RIN MIRAE ASSET RETIREMENT INSTITUTE PRESIDENT KIM GYUNG ROK EXecUTIVE DIRecTOR LEE SANG GEON ReSEARCH FeLLOW YOON CHI SUN ReSEARCHERS OH EUN MI, OH HYUN MIN MIRAE ASSET GLOBAL InVESTMENTS (USA) LLC MIRAE ASSET GLOBAL InVESTMENTS (UK) LIMITED 03 MIRAE ASSET GLOBAL InVESTMENTS 3 Chinese Tourism (HOng KOng) LIMITED Big Moves, Big Opportunities in the Chinese Tourism MIRAE ASSET GLOBAL InVESTMENTS Industry (InDIA) PVT.LTD. 08 8 Indian Auto MIRAE ASSET GLOBAL InVESTMENTS Riding on the Wheels (BRAZIL) LIMITED Of Fortune 13 Brazilian Business PUBLISHED BY MIRAE ASSET FINAncIAL GROUP Food Truck 2.0 PUBLISHER & CHAIRMAN HYEON-JOO PARK 13 Emerging Markets Insight is a quarterly, on-line publication of Mirae Asset Financial Group. 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EMERGING MARKETS INSIGHT 2 Chinese Tourism BIG MOVES, BIG OPPORTUNITIES IN THE CHINESE TOURISM INDUSTRY Chinese are traveling in record numbers at home and abroad, and the industry is scrambling to keep up. hina entrepreneur c By Wang Yueping / Syndication EMERGING MARKETS INSIGHT 3 Chinese Tourism In 2015, various M&A, or strategic invest- ment deals, were initiated by Chinese CHINA DISPOSABLE INCOME PER CAPITA domestic tourism giants, including Uanda, (UNIT : CHY) Tencent, Baidu, Hainan Airlines, Fosun, and Utourworld, increasing the investment scale 31,195 by 2.4 times over 2014. 21,810 26,955 17,175 On this basis, the giants will continue to increase tourism investment and M&A in 2016. Among these, the merger and reor- ganization between China International 2009 2011 2013 2015 Travel Service Limited (CITS) and China Travel Service (HK) Group Corporation (HKCTS) will build a new tourism ecosys- tem to accelerate improvement of the CHINESE TRAVELERS industrial chain. On February 23, 2016, CITS announced N umber of Travelers Abroad ( UNIT : MN) D omestic Travelers (UNIT : BN) that its controlling shareholder CITS Group Corporation (CITS Group) and HKCTS were 120 4 planning strategic reorganization, but the 120 4.0 107 3.6 98 3 3.3 specific details had yet to be determined 80 3.0 83 2.6 and were subject to the approval of the 70 2 competent authority. 40 1 Because both parties are powerful central 0 0 enterprises — CITS Group owns the sole 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 duty-free group in the Chinese tourism industry, and this reorganization also SOURCE : CHINA NATIONAL TOURISM AND LEISURE involves three listed subsidiaries — this breathtaking announcement immediately stirred up the whole market. Soon after the afternoon session opened Reorganization of present, HKCTS controls two listed compa- on February 24, the stock price of CTS nies, namely China Travel HK and CTS CITS and HKCTS International Logistics subsidiary to HKCTS International Logistics. rapidly hiked, rising by 4.96 percent at the has long been the subject As early as November 5, 2015, it was said close; while the stock price of HKCTS rose of rumor. that HKCTS was about to merge with CITS, by 0.75 percent to close at HK$2.68/share. and there were two plans to be considered: HKCTS and CITS would form “a new CITS,” Buzz on reorganization or the three central enterprises CITS, Reorganization of CITS and HKCTS has long free goods, integrated tourism project HKCTS, and Overseas Chinese Town (OCT) been the subject of rumor. development and management, transpor- would be combined. Reorganized from China International tation, and e-commerce. However, rumor is rumor after all. CITS Travel Service Limited and China Duty Free HKCTS originated from Hong Kong China then issued a clarification announcement, Group in 2004, CITS Group owns a listed Travel Service established by Chen indicating that matters concerning combi- company (CITS) and many subsidiaries Guangfu, a pioneering banker, in 1927, and nation and reorganization of central enter- with altogether 232 enterprises included is one of the three central enterprises head- prises needed to be decided by superior into its consolidated statements. CITS quartered in Hong Kong. Its business departments, and after consulting its con- Group engages in a broad business scope, involves travel agency, hotel, scenic spots, trolling shareholder CITS Group, it was such as travel services, distribution of duty- real estate, finance, logistics, and assets. At learned that, up till then, no relevant docu- EMERGING MARKETS INSIGHT 4 Chinese Tourism ment had been received by CITS Group; the state-owned Assets Supervision and also, neither the listed company nor CITS By statistics, from 1985 Administration Commission of the State Group had submitted to the superior to 2014 Chinese domestic Council (SASAC), mainly specializing in sce- authority concerning combination among tourism grew by 15 times, nic spots, travel agencies, hotels, passenger CITS, HKCTS, and OCT. transport, and other tourism-related busi- However, though the rumor was false it from 240 million to 3.63 ness. suggested both sides and leaders of the billion person-times. As of March 9, 2016, HKCTS hadn’t pub- central enterprises involved, including rele- lished its 2015 annual report. However, as vant officers of SASAC, the state-owned the recent announcement on March 8 Assets Supervision and Administration shows, it was actively engaged in a share Commission, had been discussing the likely to get asset injection. buyback. merger of CITS and HKCTS, dating to Based on open information, CITS realized November last year, but no definitive results US$3.2 billion of gross revenue in 2015, up Big Mac of the tourism industry had been finalized. 6.54 percent on a year-on-year basis; and The tourism industry is widely recognized However, according to rumor and the US$240 million of net profit, a rise of 9.38 as a rising-sun industry, but facing Internet most up-to-date information, HKCTS and percent year-on-year. enterprises such as Tuniu and Ctrip, it CITS were more likely to form “a new CTS International Logistics subsidiary to remains uncertain whether the merger CITS,” though the finer details about how to HKCTS hasn’t released its financial data in between CITS and HKCTS can help consoli- reorganize their assets and how to integrate 2015, but after the announcement was date their position and achieve the desired the listed companies remain to be deliberat- made, its stock price showed positive effect. ed over. But after the completion of reorga- movement. China Travel HK is the only By statistics, from 1985 to 2014 Chinese nization at the level of parent company, the HK-listed platform of China National Travel domestic tourism grew by 15 times, from listed companies and their subsidiaries are Service Group Corporation subordinated to 240 million to 3.63 billion person-times. The EMERGING MARKETS INSIGHT 5 Chinese Tourism compared with other fields, continues to maintain good growth prospects. In 2016, the giants will expand their investment in tourism M&As, and in addition to online tourism, airlines, hotels, and tourism real estate will be hot fields, and a blueprint for domestic tourism groups will gradually form. In this context, the merger between CITS and HKCTS will spawn a new tourism eco- system and speed development of the industrial chain. According to information in the tourism industry, Oceanspring Phase II, Anji Mount Lingfeng Holiday Resort, and some other key strategic projects of China Travel HK are in steady progress. As a listed company of the tourism indus- try, CITS has core competitiveness in busi- ness channels and operation capabilities of duty-free business. With the shaping of the “tourism – duty free” commercial mode, the company will only grow increasingly com- travel rate rose by 12 times from 23 per- The merger between CITS petitive in the future. In February 2016, five cent to 265 percent. Tourism had obviously ministries and commissions formally issued become a routine consumption activity of and HKCTS will spawn a a document to call for bids on the operating Chinese residents. The number of tourists is new tourism ecosystem and right of domestic duty-free stores.