Trip.com, Cathay Pacific and other travel stocks rally amid market sell-off as Hong Kong eases quarantine rules
- Travel-related stocks gained, bucking a broader market slump, after Hong Kong unveiled measures to ease quarantine rules for incoming travellers
- Rally offers belated consolation as the Hang Seng Index slipped into bear-market territory and Singapore overtook the city among global financial hubs
Chinese online travel agency Trip.com Group jumped 5.1 per cent to HK$206.80 and the city’s flagship carrier Cathay Pacific Airways added 1 per cent to HK$8.92. EGL Holdings, a hotel and restaurant operator, jumped 36 per cent to HK$1.05, while HK&S Hotels added 3.2 per cent to HK$7.19.
“That’s a catalyst for relevant stocks, particularly those local travel-linked stocks in Hong Kong,” said Wang Chen, a partner at Xufunds Investment Management in Shanghai. “But the impact on the broader market will be limited, as lots of the listed companies in Hong Kong have their main businesses on the mainland, where the Covid restrictions are still in place.”
Some investors and analysts had earlier predicted a meaningful and sustainable rebound for the city’s stocks, if the government scrapped the mandatory quarantine. CCB International said that the move would put Hong Kong back on its feet as a global financial hub, while Invesco said that the sectors that were hit hardest by the pandemic such as tourism and travel would get a respite from sell-offs.
The Hang Seng Index has dropped 23 per cent this year, making it the world’s worst-performing benchmark, as the US$4.8 trillion Hong Kong market reels from a flurry of headwinds – from concerns about economic growth in China and a depreciating yuan to aggressive interest-rate increases by the US Federal Reserve.
The decline probably has more room to run, even as the 73 members on the Hang Seng Index trade at a record 27 per cent discount on average to their book values based on Bloomberg data. The Fed’s hawkish stance on rate increases means that capital outflows will continue in the Asian region and historical data shows that local stocks are prone to underperform on the back of increases in prime rates by the biggest commercial banks.
“The biggest headwind that is weighing on Hong Kong stocks is not the pandemic, but global tightening that’s triggering consistent capital flights from the local market,” said Wang at Xufunds.