How is Covid-19 impacting on cruise lines’ stocks?

Asian operators have begun “cruises to nowhere” from Singapore, Japan and China.

Asia.- Major cruise lines saw stock market performance improve as they began launching cruises to nowhere but have since had to push back their expectations for a return to normal operations.

Now investors are struggling to see a light at the end of the tunnel for the return of luxury sailing.

According to a report from Deutsche Bank, cruise ship stocks outperformed the Standard & Poor’s Index by about 2,900 basis points in the last quarter of 2020.

But operators now face the critical question on when they will return to business as the world navigates new waves of Covid-19 infections.

The bank wrote: “We don’t think the market is truly any closer to understanding exactly what needs to happen for cruises to resume than it was when the stocks were 50 per cent or lower than they are today.”

The financial firm says the risk/reward ratio suggests investors should wait for a better entry point before buying into cruise ship stocks.

Deutsche Bank also pointed out that after a year of cutting costs and reducing capacity, it is likely that revenues will be much higher than before once the companies can resume business.

Cruise ships in Asia

Cruises in Asia were halted in March 2020 due to the Covid-19 outbreak.

In November 2020, Genting Singapore resumed its cruises to nowhere on a trial basis, while the Japanese firms NYK and Mitsui also began running short local trips.   

Soon after, Royal Caribbean International initiated cruises to nowhere sailing from Singapore.

By mid-December, cruise lines were also able to restart operations in China.

The ships are allowed to sail with reduced capacity to run short, domestic cruises with strict safety protocols in place.

Passengers are required to show negative Covid-19 test results and in some cases the cruises have their own labs to process tests.