Asia Leisure Stocks Shine Ahead of Muted Holiday Season

(Bloomberg) -- With much of Asia heading into a holiday period, investors are showing signs of warming toward hotels, restaurants and other leisure stocks as economies begin tentative steps at reopening.

A basket of two dozen such equities has climbed almost 25% since March 23, more than the wider MSCI Asia Pacific Index, according to data compiled by Bloomberg. The divergence accelerated April 7, after China reported zero deaths for the first time since the coronavirus outbreak emerged in December and shortly before the lockdown was lifted in Wuhan.

Investors are betting on pent-up demand for fun as people look to return to regular life after months of social distancing. There may also be an element of bottom-fishing at play: At its March low, the basket was down as much as 45% this year.

While it’s likely too soon for leisure companies to benefit as they would normally from upcoming holidays -- China, Hong Kong and South Korea have multiple days off and Japan begins Golden Week on Wednesday -- the top performers in the basket since the March low include a mix of hotel, casino and fast food-operators from across the region:

• Kangwon Land Inc., a South Korean casino and hotel services provider, leads the way with a 55% advance.
• Australian gaming machine maker Aristocrat Leisure Ltd., Bangkok hospitality and restaurant services firm Minor International Pcl and casino operator Genting Singapore Ltd. are all up more than 40%.
• Fried chicken purveyor Jollibee Foods Corp. leads fast-food chains with a 49% jump.

The worst performing name on the list is Oriental Land Co., operator of the Disney parks in Tokyo, which is up less than 1% since March 23. The parks have been closed since late February and a decision will be made on re-opening in mid-May, Oriental Land said earlier this month.

Ease in Restrictions

With the coronavirus originating in Asia, the expectation is that the region will be the first to exit measures to deal with the global pandemic. In a first step at a return to normality, Hong Kong is preparing to reopen public facilities, and New Zealand emerged from almost five weeks of a nationwide lockdown, offering a return to work for as many as half a million people.

Meanwhile, the state of Western Australia began allowing gatherings of as many as 10 people on Monday, while New South Wales and Queensland will ease restrictions later this week. India allowed some economic activity to resume on Monday to limit the damage to Asia’s third-largest economy.

Risk Appetite

Investors’ returning appetite for risk is also showing up in other areas. Small-cap stocks in the MSCI Asia Pacific Index are up about 8% so far in April, compared with a 5% advance in large-cap peers, the data show.

“In Asia the recovery has been much more risk-on where value and small caps led the way” compared with a growth-led recovery in Europe and the U.S., Sanford C. Bernstein strategists including Sarah McCarthy wrote in a note Tuesday.

©2020 Bloomberg L.P.