Promising developments on the vaccine front have sparked optimism that the pandemic’s end may be in sight. But if the market trends that immediately followed positive vaccine news are any indication, some sectors will benefit a lot more than others.
Massachusetts-based biotech company Moderna said last week that its coronavirus vaccine was nearly 95% effective at preventing Covid-19. That news came a week after U.S.-based Pfizer and Germany’s BioNTech revealed similar positive results from trials of their own vaccine.
Those vaccine announcements come as the coronavirus spreads rapidly — again — in the United States and Europe. It will take time for vaccines to become readily available, but analysts see clarity on the vaccine front as fueling hope of a return to normalcy sooner rather than later.
In a research note following Moderna’s announcement, U.K.-based investment bank Liberum said the vaccine suggests there won’t be a “protracted or even indefinite period of having to live with the virus and its risks.”
Possible winners
The aviation sector stricken by the pandemic seems to have benefited the most from the positive vaccine news. On Nov. 16 on the back of the Moderna news, shares of United Airlines gained as much as 8.6%, while American Airlines and Delta both jumped roughly 6%.
Shares of British Airways owner International Airlines Group rose 12.2% — following a 40% increase that came after Pfizer’s earlier announcement.
… investors are expecting the retail property market in Europe and U.S. to benefit most from the vaccine, followed by office and hospitality sectors.
Analysts see vaccine developments as encouraging news for the sector, whose investors hope to see leisure and business travel make a comeback. But there are “still challenges for airlines,” said Brendan Sobie, an independent aviation analyst.
“The long-term outlook for pickup in business travel is still uncertain,” he told CNBC. “There are some estimates that demand could drop as much as 5% to 20% permanently, as companies come to see business travel as less of a necessity.”
Another sector that could see gains is property and commercial real estate. The sector has been hit hard by the pandemic and a global work-from-home trend. But the idea of a viable vaccine has raised the prospect of people returning to work in offices in the city centers.
The iShares Global REIT ETF, which tracks real estate stocks around the world, is up about 9% since the world’s first credible vaccine announcement on Nov. 6. It’s up more than 13% November to-date.
Shares of Empire State Realty Trust, a real estate investment trust focusing on office and retail properties in Manhattan, jumped more than 37% after Pfizer’s news. Shares of SL Green, one of New York’s largest commercial landlords, jumped nearly 37%.
Elsewhere, shares in the U.K.’s largest office landlords Land Securities and British Land have rebounded, outperforming the wider market.
Lee Fong, Asia Pacific research director at commercial real estate services firm Jones Lang LaSalle, said a potential vaccine offers hope against “the uncertainty that has been troubling economies and real estate markets.”
Judging from the initial reactions from the listed real estate market, “investors are expecting the retail property market in Europe and U.S. to benefit most from the vaccine, followed by office and hospitality sectors,” Fong said in an email interview.
A gradual return to normalcy is also likely to provide the impetus for “more decision-makers, whether occupiers or investors, to move forward with plans that may have been put on hold, supporting a pick-up in real estate activity,” he noted.
Possible losers
High-flying technology companies, many of whose shares thrived during the pandemic as people spent more time logged on from home, have seen their stocks trail the boarder market since the vaccine news. And while they’ve mostly held onto the ground they’ve gained in 2020, they did give some back after the drug companies touted their vaccine advances.
E-commerce giant Amazon, whose online shopping services have been essential to millions throughout the pandemic — along with its video streaming service — saw its shares tumble roughly 5.1% after Pfizer’s news. On the other side of the Atlantic, London-listed online grocery retailer Ocado lost 5.2%.
The U.S.-traded shares of Alibaba and JD.com have had a similarly volatile November, though tech shares in China arguably were hit harder by Beijing’s abrupt intervention in Ant Financial’s planned initial public offering than they were by any vaccine news.
Other stay-at-home stocks saw steep declines.
Shares of Zoom Video, the video conferencing company that has become a household name this year, slumped as much as 17.4% following Pfizer’s vaccine news as some investors bet that workers will be returning to the office.
Shares of U.S. streaming giant Netflix got crushed, falling 8.6% after Pfizer’s announcement.
Certainly, those web-based companies were up in a big way year-to-date, and they remain so.
Before Pfizer’s news, Zoom Video had skyrocketed 635% in 2020. Amazon and Netflix were up 79.2% and 59.1%, respectively.
But some analysts predict the positive vaccine developments could generate a longer-term sell-off for stay-at-home stocks.
“Is this the start of a major rotation? Quite possibly,” Johanna Kyrklund, chief investment officer at asset management company Schroders, wrote in a blog post. “We may finally have found the catalyst to spark a move away from the stay-at-home stocks that have benefited from lockdown, towards recovery stocks.”
