Asia reopening boosts travel, fashion brands; pandemic winners take backseat

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28/10/2021 10:47

By Sayantani Ghosh and Byron Kaye
    SINGAPORE/SYDNEY, Oct 28 (Reuters) - Fashion brands and
airlines are creeping back into investors' good graces in Asia
as lockdowns ease and vaccination rises, boosting travel and
leisure activities, taking some shine off pandemic stalwarts
such as supermarkets and gadget makers.
    Earnings report cards show that people are spending less
time watching TV or shopping online for groceries as they resume
dining out or plan vacations after emerging from coronavirus
curbs. Luxury purchases from China's big spenders, still unable
to travel abroad, are also rebounding.
    Asia-Pacific airlines are offering more flights as some
countries resume domestic travel, and some like Singapore allow
quarantine-free travel for select vaccinated visitors.
Australia's planned reopening of state and international borders
has led to a surge in bookings.  urn:newsml:reuters.com:*:nL4N2R90BM  urn:newsml:reuters.com:*:nL1N2RN09G
    "There is massive demand for loved ones wanting to get
together for Christmas," Alan Joyce, CEO of Australia's Qantas
Airways  QAN.AX  said last week. "There is demand for people
wanting to take that holiday that they have been looking forward
to for nearly two years."
    To be sure, a recovery in the tourism sector in Asia is
months away and China's huge domestic travel market remains in
flux. As well, businesses including McDonald's  MCD.N  are still
struggling with frequent and temporary curbs that countries
impose to control outbreaks.  urn:newsml:reuters.com:*:nL4N2RN3IB  urn:newsml:reuters.com:*:nL4N2RN3DZ
    But airline stocks in the Asia Pacific region climbed nearly
5% over the last three months  .TRXFLDAZPUARLI  while global
airlines  .TRXFLDGLPUARLI  slipped 6% due to a
slower-than-expected return of corporate travel. 
    The broader MSCI All Country Asia Pacific Price Index
 .MIAP00000PUS  rose roughly 2% in the same period.  urn:newsml:reuters.com:*:nL4N2R90BM
    European fashion houses like LVMH  LVMH.PA  and Kering
 PRTP.PA  posted stellar results in China as appetite for luxury
items remained undimmed, despite power shortages and a property
sector crisis hurting the economy.  urn:newsml:reuters.com:*:nL1N2RE03R
    "China's population and its middle classes are increasing
and their appetite for beauty is not satisfied," L'Oreal CEO
Nicolas Hieronimus said last week.
    Hieronimus expects a recent shift in Chinese government
policy to narrow the gap between rich and poor to boost the
middle class, a sentiment echoed by LVMH.  urn:newsml:reuters.com:*:nL1N2RH1TG
 urn:newsml:reuters.com:*:nL8N2R84M0
    Japan's Fast Retailing  9983.T  reported record profits in
China last quarter, where it will open its first flagship store
next month. Japanese cosmetics giant Shiseido Co  4911.T 
believes next summer will be a "turning point" as inbound
tourists from China return.  urn:newsml:reuters.com:*:nL1N2RA0B6  urn:newsml:reuters.com:*:nL4N2RA0WH
    
    EARLY WINNERS
    Companies globally are struggling with severe labour
shortages, supply bottlenecks and marine logjams as economies
bounce back from pandemic lows, resulting in a steep rise in
costs https://www.reuters.com/business/only-way-is-up-corporate-chiefs-warn-prices-2021-10-21/#:~:text=Inflation%20watch:%20Corporate%20chiefs%20see%20prices%20moving%20in%20only%20one%20direction,-By%20Siddharth%20Cavale&text=Oct%2021%20(Reuters)%20-%20For,prices%20are%20only%20going%20higher.
 A long-running chip shortage has disrupted the auto industry.
 urn:newsml:reuters.com:*:nL1N2RH0LQ
    For supermarkets, among the early winners of the pandemic
when people scrambled to stockpile food and toilet paper, the
rising inflation is likely to offset some of the post-pandemic
slowdown.
    Australian grocer Woolworths  WOW.AX  said on Wednesday that
food sales started to slow in October. Its shares have fallen
10% since mid-August when the pace of vaccinations started
picking up. The stock rose nearly 40% during the 17 months
prior, when coronavirus restrictions were in place.  urn:newsml:reuters.com:*:nL4N2RM4LQ
    "The big question now is how many people will return to the
offices, how will that play out in terms of at-home
consumption?", said Morningstar retail analyst Johannes Faul. 
    Pandemic winners are unlikely to turn losers overnight,
though, said Jason Teh, chief investment officer at Vertium
Asset Management in Sydney. But work-from-home trends that
benefitted companies like Australian electronics retailer JB
Hi-Fi  JBH.AX  were waning as vaccination surged, he said.
    China's smartphone sales in the third quarter fell 9% from a
year earlier, according to Counterpoint Research.
    While pent up demand from supply bottlenecks is likely to
support a seasonally strong holiday quarter, sales are starting
to slow at chipmakers and component suppliers such as South
Korea's Samsung Electronics  005930.KS  and LG Display
 034220.KS .  urn:newsml:reuters.com:*:nL1N2RO001  urn:newsml:reuters.com:*:nL1N2RN0BK
    "LCD panels for televisions are expected to see further
drops in the fourth quarter as vaccinated people have begun to
spend less time in front of screens," said Park Sung-soon,
Seoul-based analyst at Cape Investment & Securities. 

 (Reporting by Sayantani Ghosh in Singapore and Byron Kaye in
Sydney; Additional reporting by Tom Westbrook in Singapore,
Jamie Freed in Sydney, Heekyong Yang and Joyce Lee in Seoul,
Rocky Swift in Tokyo; Editing by Ana Nicolaci da Costa)
 ((sayantani.ghosh@thomsonreuters.com;))