The Aussie dollar is taking an absolute beating…
You’re not planning on travelling overseas, are you?
Last Friday it fell as low as $0.66622 against the American dollar.
To put it into context for you, the Aussie dollar hasn’t been this low since the Global Financial Crisis.
But don’t think that this is all bad news.
A low Aussie dollar makes our country way more attractive to foreigners.
Don’t take my word for it though…
Economist Shane Oliver said it:
‘Makes the country more competitive internationally which could soften the blow from the coronavirus impacts.’
Shane Oliver is the chief economist at AMP Capital.
Aussie Tourism, it’s dead
We have one problem here though…
Chinese travellers are the engine of global travel growth. That’s not a happy thought right now.
I’ve got a few friends who work in some of the hotels around Melbourne…
They’ve told me that the impact of this outbreak has been huge.
The word is these hotels are dealing with cancellations of $90,000 a day.
Now, I can’t confirm the accuracy of this information. So we’ll take it with a grain of salt.
But it’s not outside the realms of possibility.
How long this will go on for is anyone’s guess.
And the impact of this outbreak on our economy will take months to play out.
Here’s an index to watch
I decided to create a ‘tourism’ index…you won’t see this anywhere else.
Take a look at the image below:
What you’re looking at above is a custom market-weighted index. The chart is put together using daily data.
It has Crown Resorts, Flight Centre, Apollo Tourism, SeaLink Travel, Corporate Travel Management, Webjet, and Helloworld Travel in it.
There are two comments to make about this index…
The weight of the money has spoken
You can see instantly that the travel sector topped out in 2018.
It continued to fall for well over a year, before finding a base in September 2019.
The index rose for a few short months before hitting a major top. This time it came in December 2019.
The coronavirus is now dragging the outlook for the Aussie tourism sector way down.
This market is pricing in declining revenues as business disappears.
Investors are selling down shares to reflect this decline in revenue.
We’re going to watch this index from here as a bellwether for the whole sector.
By no means am I suggesting this is complete guide. It’s a weathervane only. I may make some small adjustments to it over time.
I do think it gives us a good indication of market sentiment.
Right now, it’s wise to follow the weight of the money and sit on the sidelines rather than go ‘bargain hunting’ here.
If the index keeps declining, it indicates that the impact of this virus is going to continue to push our tourism sector lower.
If we start to get a rising chart though, this would indicate that I’ll keep you posted.
Until next time,
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