[2022 Reopening Stock Outlook] Two Years with COVID-19... Reopening Stocks Dependent on Overseas Markets

Travel Stocks Expected to Dramatically Rebound as COVID-19 Eases
Mixed Outlook for Airline Stocks and Offline Retail Stocks

Foreigners arriving at Incheon International Airport Terminal 1 on the 6th are passing through the quarantine checkpoint. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Gong Byung-sun] It has been nearly two years since the outbreak of COVID-19. Stocks related to reopening, such as travel, aviation, and offline retail, which have been waiting for the complete end of COVID-19, are expected to benefit differently depending on overseas quarantine measures.

On the 31st, the securities industry pointed to travel-related stocks as beneficiaries among reopening-related stocks. This is because the easing of lockdown measures in major overseas countries is expected to bring about the most dramatic turnaround in performance.

Major countries including the United States are preparing to accept incoming travelers despite the alarming spread of the new COVID-19 variant, Omicron. On the 27th (local time), the U.S. Centers for Disease Control and Prevention (CDC) announced that it would reduce the isolation period for COVID-19 patients from the existing 10 days to 5 days. French Prime Minister Jean Castex also declared that no more strict lockdown measures such as nighttime curfews or school closures would be imposed.

Jeong Yeogyeong, a researcher at NH Investment & Securities, explained, “COVID-19 suppressed people's freedom of movement and experience,” adding, “In the with-COVID phase, which means a gradual return to normal life, there will be strong demand for experiential services such as travel.”

However, the aviation sector shows mixed prospects. Unlike full-service carriers (FSCs), which have experienced a boom in air cargo due to the ongoing cargo supply shortage expected to continue until next year, the outlook for low-cost carriers (LCCs), which rely mostly on passenger demand, remains conservative. It is difficult to recover the losses incurred so far in a short period unless COVID-19 is completely eradicated. In fact, on the 10th of this month, Mirae Asset Securities maintained a ‘neutral’ investment opinion on Jin Air, a leading LCC, and lowered its target price from 20,000 won to 18,000 won. In contrast, Korean Air maintained a ‘buy’ rating with a target price of 40,000 won.

The outlook for offline retail is also mixed. This sector also depends on quarantine measures. Department stores and discount stores are based on domestic demand, where movement has been relatively free, so their performance this year is burdensome. Accordingly, KB Securities predicted that while same-store sales at department stores will increase by 21% compared to the previous year, sales growth next year will be limited to 2%.

Regarding duty-free shops related to overseas travel, a cautiously optimistic view was presented. If tourists flock to airports, a performance turnaround could be achieved. KB Securities also forecasted that unlike the department store sector, the market size of duty-free shops will grow by 28% next year compared to this year. However, Park Shin-ae, a researcher at KB Securities, noted, “It is difficult to predict how effectively COVID-19 will be controlled next year,” and observed, “It will be in 2023 when daily life normalizes and the duty-free market size will grow significantly.”

This content was produced with the assistance of AI translation services.