China Eases Pandemic-Induced Border Controls With Hong Kong – Wealth Managers React

Tom Burroughes

9 January 2023

Hong Kong’s border with mainland China re-opened yesterday – coinciding with Beijing’s removal of most pandemic-related controls on inbound travellers.

Easing controls will mainly boost tourism-related industries (online travel agencies, hotels, and airlines) and some financial service providers, as noted by and other wealth managers late last week. Selected shopping malls, retailers, and telecommunication stocks should also benefit from the shift.

“Once again, the border reopening is vital to the Hong Kong economy, as both business and leisure travellers who are travelling between Hong Kong and China have dropped more than 90 per cent vs the pre-pandemic period,” Eric Mak, equity research analyst for Asia, Julius Baer, said.

China is ending most pandemic-related measures for inbound travellers and replacing these with a new 48-hour pre-departure PCR test requirement.

“This should significantly remove the friction associated with mainland travellers returning from overseas and both business/leisure travellers heading to China. More international flights in/out of China should be added back gradually throughout 2023, subject to the Covid-19 situation and passenger demand,” the Julius Baer analyst said.

The most crowded land checkpoint (Luohu Port) will not be included in the first phase of the reopening, and the highspeed railway will resume services on 18 January. A pre-departure Covid-19 screening test (taken within 48 hours) is needed. Also, there will be an initial daily quota of 60,000 travellers on each side of the border.

“We are very encouraged to see the re-opening of China and Hong Kong’s shared border after such a long time. Currently, there is a quota of 60k people per day, which is actually quite tight relative to the pre-Covid levels. Indeed, in 2019 daily cross-border visitor traffic ranged between 100,000 and 200,000, so the current quota is equivalent to around 30 to 50 per cent of `normal capacity,’” David Townsend, managing director of EMEA business at , the, Hong Kong-based investment firm, said: “The border reopening announcement between Hong Kong and mainland China was made late last month, and since then many stocks have rebounded nicely. For example, some property companies that have a large proportion of their portfolio in shopping malls and rental assets surged by 10 to 15 per cent.”

“At the same time, retailers such as jewellery companies and healthcare-related companies with beauty clinics also posted nice gains, rising over 20 per cent. In my view, some stocks have gone ahead of themselves and are now pricing in a base or bull case scenario. As sentiment remains strong, there is no point to sell down right away, but be watchful of any pullbacks.”