- On 15th March, China lifted the final restrictions on air travel, reopening its borders for the first time in over three years.
- Air travel is expected to see a “delayed rebound”, as countries lift COVID restrictions later than initially anticipated.
- U.S. Global Jets UCITS ETF (JETS) recently added two Chinese travel companies in its quarterly rebalance, meaning it could be poised to benefit from the full resumption of travel in China.
March 2023, London
U.S. Global Jets UCITS ETF (JETS) added two Chinese travel companies in its latest quarterly rebalance, leaving it potentially better poised to benefit from lifting of travel restriction in China.
Last Wednesday, China reopened its borders to foreign tourists for the first time since the start of the COVID-19 Pandemic, which could kickstart a “delayed rebound” for the travel sector. It’s been over three years since the onset of the Pandemic in December 2019, which halted travel worldwide. Following strict lockdowns, and the eventual creation of a vaccine, travel restrictions relented in most countries. In China however, foreign visitors still faced barriers to entry up until last week, until borders were fully reopened on 15th March.
China hopes to boost its economy and revitalise its domestic tourism industry—cross-border migration in 2022 was down by 82% compared to 2019. The decision to fully reopen the country’s borders could therefore kickstart the recovery of China’s travel sector.
This demonstrates the unevenness of the travel sector’s recovery—the US was allowing fully vaccinated tourists to enter the country back in November 2021, over a year before China would eventually follow suit. Many believed that, post-COVID, worldwide borders would reopen around the same time, which would in turn give a huge boost to the travel sector. Instead, it has taken a lot longer for borders to reopen, and longer for the travel sector to recover.
Hence, there is a growing sense of a “delayed rebound”. The travel sector recovered to around 65% of pre-pandemic levels in 2022, and now that the world’s second-largest economy has retaken its place among the travel sector giants, we may have added the final piece of the puzzle in the rebound story.
This month, the Airlines ETF underwent its quarterly rebalance, in which it added Air China and Tongcheng Travel. The addition of these two Chinese stocks could mean that JETS is well-positioned to benefit from the resumption of travel to China.
JETS also has a US listed sister fund, which has accrued over $1.7 billion in AUM. HANetf has so far turned over a dozen US-domiciled funds into UCITS ETFs and listed them across Europe’s largest exchanges, including London Stock Exchange, Deutsche Borse and Borsa Italiana.
Tom Bailey, Head of Research at HANetf, comments: “Before the pandemic, China held the title of the world’s largest outbound travel market with over 150 million outbound travellers. Three years of tough COVID restrictions bought that number down to practically zero. However, with China now opening up, both internally and externally, the country’s tourism sector looks set for a rebound. According to McKinsey, if China’s air travel follows a similar recovery pattern to that of Hong Kong, the country could see four million air passengers a month by April 2023.
The addition of Air China and Tongcheng Travel to the JETS ETF, therefore, is timely. However, it should be noted that while the China reopening coincides with the ETF’s quarterly rebalancing, it was not the driving factor for this addition. JETS is a rules-based ETF that screens for fundamental factors and rules defined in the Index methodology. These two stocks made the cut because they met the screening factors.
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