Tourism stocks stoke SET slump on China ban on group tours

Tourism stocks stoke SET slump on China ban on group tours

Tourists with face maskes arrive at Don Mueang airport on Saturday. (Photo by Apichart Jinakul)
Tourists with face maskes arrive at Don Mueang airport on Saturday. (Photo by Apichart Jinakul)

The Stock Exchange of Thailand index tumbled Monday on the prospect of economic turbulence after China banned outbound group tours to fight the spread of the novel coronavirus that’s sickened thousands of people.

The SET index plunged 45.77 points or 2.92% to 1,523.78, in turnover of 41 billion baht after the morning session, with tourism shares among those bearing the brunt of the drop. The baht weakened in line with emerging-market currencies on concern about the fallout from the virus.

Chinese holidaymakers — many on group tours— spent almost US$18 billion (552 billion baht) in Thailand last year, more than a quarter of all foreign tourism receipts, government data show. The industry as a whole contributes 21% to gross domestic product, according to the World Travel & Tourism Council.

“There’s going to be a significant drop in the number of Chinese coming to Thailand in what should be a peak period,” said Win Udomrachtavanich, chairman of KTB Securities (Thailand).

Investors should avoid tourism-related stocks like Airports of Thailand Plc and hotel operators, which are likely to underperform the market in the next three months, Mr Win said.

AoT declined as much as 5.9%, the most since 2016. It closed at 68.50, down 3 baht or 4.2% after the break. The nation’s Tourism and Leisure equity index fell to the lowest level in six years. Oil companies were under pressure too partly on the risk of weaker travel demand. Thai Oil Plc slumped to the weakest price since 2015. TOP shares nosedived four baht or 7.55% to close at 49 baht after the break.

Both tourism and exports were already under pressure from a surge in the currency. Disarray over the annual budget is another obstacle for growth.

The government has rolled out more than 300 billion baht of stimulus steps in the past few months to cushion the economy, which the Bank of Thailand estimates expanded at the weakest pace in five years in 2019.

‘No crisis’

“The outbreak of coronavirus is a risk,” Tim Leelahaphan, a Standard Chartered Bank economist in Bangkok, wrote in a note. “The strong Thai baht may also affect tourism growth. That is unlikely to help an already-slowing economy.”

The new coronavirus originated in China, where dozens have died from the illness. A number of nations have diagnosed the infection in travelers from China. Thailand has so far confirmed eight cases, with five already discharged and the remainder hospitalised.

Prime Minister Prayut Chan-o-cha said Monday that Thailand has contingency plans in place to return its citizens from Wuhan if necessary, while adding that he believes China can still control the outbreak.

Public Health Minister Anutin Charnvirakul in a Sunday briefing advised Thais to avoid travelling to China until the situation improves. But he added there’s no crisis that requires Thailand to curb Chinese arrivals.

“We’re ready to take more steps if things escalate,” Mr Anutin said. “We won’t hesitate as the health of the Thai people is our priority. The potential economic impact won’t outweigh the safety of our people.”

At the same briefing, Tourism and Sports Minister Phiphat Ratchakitprakarn said tourism revenue losses could reach 50 billion baht if China’s curbs are in place for three months.

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