Leisure-focused stocks feel pressure as SA enters level 4 lockdown

Shares of JSE-listed stocks in the hospitality and tourism industries were hammered on Monday, after the reimposition of the stricter lockdown restrictions tempered expectations of quick recovery in the SA economy.

Tsogo Sun Gaming shares fell as much as 11.45%, the most since late December, before recovering to trade 6.94% weaker at R8.05 in the early afternoon on Monday. However, they are still 60% higher so far in 2021, according to Infront data.

Shares of Tsogo Sun Hotels lost nearly 8% to R2.70, though still were up 85% year to date.

“Clearly sentiment is playing a big role here as a two-week lockdown is not likely to completely derail leisure businesses,” said Rowan Williams, director at Nitrogen Fund Managers.

“However, the market has been buoyant until this point and probably over optimistic on the short-term recovery prospects for the SA economy, particularly given the increasing intensity of the third wave, and so the market is selling off as market participants moderate their expectations of a short- to medium-term recovery of the economy.”

Sun International fell 8%, its biggest one-day drop since August 2020, to trade to R18.68, as it announced that all restaurants and casinos would close temporarily, in keeping with the latest Covid-19 regulations. Sun International has also decided to temporarily shut down its hotels and resorts, including Sun City Resort and Wild Coast Sun.

“The new regulations require our casinos and restaurants to close, but given the new restrictions on leisure travel into and out of Gauteng, alcohol and the curfew, our hotels and resorts will struggle to operate, so we have taken a decision to temporarily close them too,” said COO Graham Wood in a statement.

City Lodge was off 3.22% to R3.61, after dropping as much as 6% at opening bell.

Leisure and hotel stocks have been steadily recovering, boosted by the rollout of Covid-19 vaccines around the world, which sparked optimism about a rebound in the global economy as more economies opened up and restrictions were lifted.

But in SA, the vaccination process has got off to a slow start, triggering concern by numerous JSE-listed companies in their recent reporting period. Economists and analysts have also previously cited vaccination as the key catalyst in reviving the economy, which fell the most on record in 2021.

President Cyril Ramaphosa on Sunday announced SA was entering level 4 lockdown until July 11, confirming the fear of another alcohol ban as SA grapples with a third wave of the pandemic that threatens to be worse than the first two combined.

Liquor maker Distell fell 2.27% to R163.88 in early afternoon trade, trimming its year-to-date gains to 72%.

Restaurants and other eateries will be allowed to sell food only for takeaway or delivery. 

Public school holidays will be brought forward to Wednesday this week and travel to and from Gauteng, the epicentre of the third wave, will be limited to work and commercial purposes only.

Ramaphosa said the Delta variant, first discovered in India, which is spreading across SA, is much more contagious than the previous variant of the coronavirus in SA.

This article has been updated with additional information.

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