- Lockdown relaxation plays may become the market’s focus in short term
- High vaccination rate of c.78% should avoid tightening of social distancing measures
- HK companies are less impacted by major overhangs like Ukraine conflict, China property troubles and internet regulatory concerns
- Restaurants, retail properties, discretionary spending are direct beneficiaries. HK Banks will benefit as well.
Lockdown relaxation plays may become the market’s focus in short term. April 21 2022 marks the relaxation of HK’s most stringent lockdown since COVID started in early 2020. Phase 1 of the relaxation will see a resumption of dine-in services until 10pm, with more diners allowed. Subsequent phases in the next few weeks will see further relaxation. In the past 2 months, the relatively high death rate among the unvaccinated has spurred on a much-improved drive to get the population vaccinated. This bodes well for avoiding serious lockdowns in the future. While local businesses are by no means completely out of the woods, this marks a significant turning point in HK’s fight vs COVID. We think lockdown relaxation plays may become the market’s focus in the short term.
HK companies provide resiliency from current market overhangs. During the recent selloff in 1Q22, HK companies outperformed Chinese companies listed in HK, as they are typically locally focused and are relatively less impacted by the major overhangs of the Ukraine conflict, China property troubles and internet regulatory concerns. Given the attractive valuation, this resiliency amidst the current multiple overhangs in the market is a welcomed respite. Lockdown relaxation could be a catalyst.
Pay premium for resiliency and stability amid market uncertainties. At In the current view, we think it is wise to revisit sectors that are relatively less impacted by the current market overhangs. The relaxation of the lockdown may well be the catalyst to visit sectors which have been impacted by the lockdown. We think recovery themes like Restaurant and catering, Discretionary retail, Retail REITs, Retail landlords, HK banks should provide resiliency to major uncertainties in the market.