News Analysis: Returning to normalcy
- Hong Kong government relaxes border control restrictions
- Lifting quarantine requirements bodes well for post-COVID recovery in Hong Kong
- Expectations on retail sales boost should not be overplayed.
Hong Kong government scraps quarantine requirement for arrivals. Last Friday, the Hong Kong government announced that it would end mandatory quarantine requirement for incoming overseas travelers and returning locals starting from 26 Sep. The current “3+4” quarantine arrangement, which includes 3 days of compulsory quarantine at a designated hotel and 4 days of “medical surveillance” at home, will be replaced by the new “0+3” model which requires only three days of home medical surveillance with no hotel quarantine needed. This marks the end of its stringent border control measures after more than two years. The requirement for pre-departure PCR test will also be replaced by a RAT test instead. Upon arrival, visitors are not required to wait for their PCR test results at the airport and are allowed to go to most places during the three days of medical surveillance period, except entering certain premises including restaurants and bars. Non-vaccinated Hong Kong residents from overseas will also be allowed to return. Lastly, the cap for “Return2hk” and “Come2hk” daily quota will be lifted, and the scheme will be extended to the whole of Mainland.
While relaxing border control measures should facilitate the post-COVID recovery in Hong Kong… We believe the new arrangement should encourage the return of business travellers and help maintain Hong Kong’s international financial hub status. This would play a crucial role in driving the post-COVID economic recovery for Hong Kong, and bodes well for the overall Hong Kong property market. As such, we favour SHKP as it should remain a core holding for investors betting on the sector. We do not rule out the possibility of further relaxation of border control restrictions in the not-too-distant future if imported COVID cases remain controlled after the new arrangement is in place.
…expectations on retail market recovery should not be overplayed.
While visitors will be exempt from hotel quarantine, we do not expect a surge in leisure travellers as their activities will still be largely constrained in the early days of their arrival. Furthermore, most of the tourist spending, which accounted for c.30% of Hong Kong retail sales in pre-COVID times, were contributed by mainland travellers. As long as border control measures in China remain in force, the recovery of Mainland tourist spending remains far off. On the other hand, easing of travel restrictions could prompt outbound travel among locals as it has substantially reduced the cost of travelling. This could potentially suppress domestic consumption in the near term. Overall, we should not place high expectations on a retail sales boost led by easing border control restrictions.