“Never waste a good crisis” – Winston Churchill
A virus outbreak has made an unexpected dent in the 2020 rally in China. The virus is known as 2019-nCov (novel contra virus). At least four people have died since it was first detected in December.
It was first detected in Wuhan in Central China. There are early signs that it can be transmitted from person to person.
Consumer shares were at the forefront of losses on the FTSE China A50 Index today. The index is down 2%, but food and travel stocks were down as much 5%. The Yuan has slid by 0.5%.
The outbreak raises questions for the Asian food sector, particularly the meat sector. This sector is vulnerable as consumption can fall sharply.
The SARs crisis of 2003 and the Bird Flu outbreak in 2006 had a short sharp impact on the earnings of Asian meat stocks, with falls of over 50% for some companies. But the impact was short-lived, followed by rapid recovery, with operating earnings returning to pre-crisis levels after only two quarters.
This suggests that public health standards in Asia have successfully dealt with similar outbreaks in the past. The alarm that may sound this time could be an opportunity to accumulate a sector that is directly exposed to the region’s protein boom.
Culled from Tellimer