The lifting of the WHO travel advisory is expected to lift sentiment, but analysts say a fully fledged recovery is far off Stocks are expected to add to Friday's gains today, with the market getting its first chance to react to news that the World Health Organisation (WHO) has lifted its travel advisory against Hong Kong. The advisory against non-essential travel to Hong Kong and Guangdong province was lifted after trading hours on Friday. Stocks are also likely to be helped by today's news that the mainland government will soon approve a qualified domestic institutional investor scheme, which would allow mainland savings into Hong Kong and overseas markets. Despite improved sentiment following the lifting of the travel advisory, analysts said potential upside would be limited by weakness in sectors such as property. Also, uncertainties over the continuing spread of Sars on the mainland and Taiwan remain a concern. The Sars scare has dealt a devastating blow to Hong Kong's already struggling economy, with widespread cancellations and postponements of business trips, trade shows and leisure tours. With the Sars outbreak finally abating in Hong Kong, the lifting of the WHO travel warning imposed on April 2 is seen as a vital shot in the arm. 'The WHO announcement should make people feel better,' said Andrew Look, head of Hong Kong research and strategy at UBS Warburg. Kenny Tang Sing-hing, associate director at Tung Tai Securities, said: 'The Hang Seng Index is likely to continue its rally [today]. It will pass the level of 9,500 and 9,600 [points].' The index gained 172.24 points to close at 9,303.73 on Friday, buoyed by news of improved investor sentiment on Wall Street and further signs of an economic recovery in the United States. 'I expect the market could go up even sharper than the strong rally [on Friday] as it heads for month-end options expiry,' said Steven Leung Wai-yuen, director at UOB-Kay Hian Hong Kong. Kingston Lee King-yue, head of Hong Kong and China research at ING, said possible earnings upgrades by corporates hard hit by the Sars crisis and the travel warning - such as Cathay Pacific Airways - would sustain market sentiment in the near term. But analysts warned that pronouncing a full-fledged recovery would be premature. 'Sentiment will be positive but there is no change in fundamentals,' said Henry Ho, Merrill Lynch's head of Hong Kong and China research. 'Sectors battered by Sars will not recover immediately.' Mr Look said the WHO's decision to lift its travel advisory might not have an immediate impact on corporate earnings. Recovery of Hong Kong's travel-related sectors would hinge on the stabilisation of the Sars situation in Beijing and Taiwan. WHO travel advisories remain in place against Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia and Taiwan. 'Tourists in Hong Kong are mainly in transit to other cities in China [such as Beijing and Shanghai],' Mr Ho said. 'As the [WHO's decision] only relates to Hong Kong and Guangdong Province, recovery will not be seen until the Beijing and Shanghai warnings are withdrawn.' Sectors dogged by non-Sars-related weaknesses would be a further drag on momentum. 'Property companies' earnings might still have problems given lower income growth expectations,' Mr Look said. Analysts said major banks, mainland utilities and small-cap plays with export exposure had a rosier short-term outlook. 'With a weak US dollar, we see a re-distribution of the trading pattern - Europe will import more and the US export more,' said Ajay Kapur, regional head of strategy research at Citicorp Smith Barney. 'But the Asian exporters will still benefit as they can export more to Europe and also the US.'
