Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

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Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> rallied 14% on Monday in the US on news that <a href="https://www.smartkarma.com/entities/pfizer-inc" target="_blank" data-smartkarma-citation="entities:1131:1" rel="noopener">Pfizer Inc (PFE US)</a>'s Covid19 vaccine had been found highly effective, and that distribution of the vaccine would begin before the end of 2020. Many travel-related stocks, such as airlines (<a href="https://www.smartkarma.com/entities/american-airlines-group-inc" target="_blank" data-smartkarma-citation="entities:3663:1" rel="noopener">American Airlines Group (AAL US)</a>, +15%) and cruise operators (<a href="https://www.smartkarma.com/entities/royal-caribbean-cruises-ltd" target="_blank" data-smartkarma-citation="entities:1629:1" rel="noopener">Royal Caribbean Cruises (RCL US)</a>, +29%) also rallied by 10% or more. We have anticipated a rebound in Chinese travel-related shares when there is positive news about a 'normalization' of travel, especially cross-border travel, which has been hit harder than domestic travel. As investors in Chinese travel-related stocks begin thinking about a return to 'normal' market conditions for the sector, now is probably a good time to revisit what 'normal' means. In the months prior to the emergence of Covid19, Chinese travel demand -- outbound and domestic -- was by several measures quite weak. While there will likely be a brief period in 2021 during which pent-up demand is finally met with easing travel restrictions, we believe that in the medium-term demand growth will sink back to the single digits.

Trip.com (TCOM US) rallied 14% on Monday in the US on news that Pfizer Inc (PFE US)'s Covid19 vaccine had been found highly effective, and that distribution of the vaccine would begin before the end of 2020. Many travel-related stocks, such as airlines (American Airlines Group (AAL US), +15%) and cruise operators (Royal Caribbean Cruises (RCL US), +29%) also rallied by 10% or more. We have anticipated a rebound in Chinese travel-related shares when there is positive news about a 'normalization' of travel, especially cross-border travel, which has been hit harder than domestic travel. As investors in Chinese travel-related stocks begin thinking about a return to 'normal' market conditions for the sector, now is probably a good time to revisit what 'normal' means. In the months prior to the emergence of Covid19, Chinese travel demand -- outbound and domestic -- was by several measures quite weak. While there will likely be a brief period in 2021 during which pent-up demand is finally met with easing travel restrictions, we believe that in the medium-term demand growth will sink back to the single digits. 

Trip.com Rallies 14% on Vaccine News. But What's the 'Normal' We'll Return To in 2021?