With talks on the horizon for border opening and international flights resuming, the COVID-19 re-opening trade is “rearing its head” again, according to equity managers.
This month, it was announced international flights could restart to certain countries from mid-December which caused the share price of stocks like Flight Centre and Qantas to spike.
This followed a period during reporting season when returns were less thematic and more broad-based as cities went back into lockdown.
Andrew Mouchacca, Flinders Investment Partners portfolio manager, said: “The re-opening trade is rearing its head again and the market is looking more favourable on travel companies again, especially now we have a roadmap in place. Tourism stocks are doing better than they were”.
Shih Thin Wong, chief investment officer at Prime Value, said: “The Australian stockmarket is after any next thing, not even a ‘next big thing’. Just any next thing to fulfil a short-term craving.
“For example, the immediate reaction to Australia’s borders closing, or re-opening, sees a flurry of quick-fire reaction to travel-related stocks such as Flight Centre or Webjet.
According to FE Analytics, shares in Helloworld, Flight Centre, Webjet and Qantas had all risen sharply over the past month to 14 September with Helloworld up 33%, Flight Centre up 20%, Qantas up 19% and Webjet up 17% versus losses of 1.2% by the ASX 200.
Performance of travel stocks versus ASX 200 over one month to 14 September 2021
Ophir co-founders, Andrew Mitchell and Steven Ng, said the firm was positioning its portfolios towards companies which were exposed to the re-opening theme.
“Given the outperformance of re-opening theme stocks in other countries that are now living with COVID-19, we are at the margin skewing our Australian funds to companies that are exposed to this re-opening thematic domestically,” they said.
“Though we’ve been conscious not to be in positions that are not overly reliant on Government-supported demand.
“We think the market will continue to rewards companies more exposed to a reopening domestic economy in the months ahead, despite it likely to be a bumpy and uneven journey.”
However, the lack of travel had been a boon for domestic companies in the meantime as there was circa $65 billion which was usually spent on overseas travel, according to Airlie.
Emma Fisher, portfolio manager, said: “Australians spend $65 billion a year overseas and that money is now trapped in our local economy. While we lose out on the $45 billion we typically bring in from tourists annually, these imported tourist dollars tend to find their way only into very targeted parts of the economy.
“By contrast, trapped locals are spending widely across the economy and saving too; we’re seeing it in record deposit levels for the banks, in booming retail spend, rebounding new car sales and record used car prices.”