HK’s Mass Transit Rail recovery dented by spike In COVID-19 cases: S&P

July 15, 2020

HONG KONG  -- S&P Global Ratings said today that the sudden increase in COVID-19 cases in Hong Kong, leading the Government to re-introduce strict social distancing measures, may reduce local transportation traffic, pressuring the stand-alone credit profile of Hong Kong's Mass Transit Rail Corporation (MTRC), and threatening the recovery of the metro system operator's passenger traffic,  already battered by the COVID-19 outbreak and social unrest.

There were 212 local cases (including those epidemiologically-linked with local cases) reported between July 8 and July 14, the highest number of local cases in Hong Kong within a seven-day period since the outbreak of COVID-19 six months ago.

The Hong Kong government has tightened social distancing measures from July 11.

S&P said MTRC's total passenger traffic figures showed early signs of recovery in May and June 2020, with the June figures only 25% lower than the same period last year -- and significantly better than figures in February through April.

"However, this recovery could be short-lived if people decide to avoid public transport and work remotely, as with March and April, following this latest outbreak," S&P said.

"On an aggregate basis, MTRC reported a total drop in passenger traffic of 37.7% year-on-year for the first six months of 2020. We expect cross-border and Airport Express services to remain virtually shut due to control measures."

S&P said: "MTRC will continue to face a challenging environment in the next several years, in our view.

"The social unrest and COVID-19 outbreak in Hong Kong are weighing on domestic economic conditions amid a weakening global economy.

"We forecast air passenger traffic at Hong Kong International Airport will not return to pre-pandemic levels until 2023, meaning MTRC's Airport Express route is likely to undergo a similar recovery pattern.

"In addition, the company faces financial uncertainty due to cost over-runs and project quality claims associated with the Shatin-Central Link project. (ATI).