Why are ASX 200 travel shares having such a shocker today?

New COVID variants are challenging the pace of modified vaccine rollouts

| More on:
Woman sitting looking miserable at airport

Image source: Getty Images

S&P/ASX 200 Index (ASX: XJO) travel shares are having a lousy day today.

In fact, Flight Centre Travel Group Ltd (ASX: FLT), Webjet Limited (ASX: WEB), and Qantas Airways Limited (ASX: QAN) are all in the unwelcome group of worst 5 performers on the ASX 200 today.

At the time of writing, the Qantas share price is down 5.1%, the Webjet share price is down 5.3%, and the Flight Centre share price is down a painful 6.7%.

The ASX 200 is also in the red, but ‘only’ down by 1.2%.

So what’s going on?

COVID variant hammers confidence in ASX 200 travel shares

ASX 200 travel shares, and indeed most risk-on assets, are taking a beating today on news of a new and potentially dangerous COVID variant.

The new variant – B.1.1.529 – emerged in South Africa where full vaccination rates remain below 40%. It’s believed the variant may have stemmed from an individual with HIV, according to Francois Balloux, director of the UCL Genetics Institute.

As Bloomberg reports, “The virus can linger for longer in people whose immune systems are compromised, potentially offering a bigger window for mutations.”

Of potential concern for the world’s reopening plans and investors in ASX 200 travel shares:

Scientists are still trying to determine whether the new variant … is more transmissible or more lethal than previous ones. What’s clear is that it has the most mutations of any strain yet identified.

Air travel restrictions rolled out

ASX 200 travel shares look to be getting sold off amid fears that initial travel restrictions just put in place overseas to mitigate the spread of the new variant may only be the tip of the iceberg.

Both the United Kingdom and Israel have already announced a temporary halt on flights from South Africa and 5 neighbouring nations.

Commenting on that move, the UK’s Health Secretary Sajid Javid said (quoted by Bloomberg): “As part of our close surveillance of variants across the world, we have become aware of the spread of a new potentially concerning variant.”

Travellers who do arrive from these nations will need to quarantine in hotels.

Unfortunately, as we came to see with the Delta variant, the genie may already be out of the bottle. Hong Kong has reported 2 travellers have tested positive for B.1.1.529, which has yet to receive its own Greek letter.

Certainly not the sort of news investors in ASX 200 travel shares hoping for a smooth reopening wanted to hear.

Don’t shoot the messenger!

Should you invest $1,000 in Flight Centre right now?

Before you consider Flight Centre, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Flight Centre wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited and Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Travel Shares