Why you should care
Shares of manufacturers of rubber gloves and surgical equipment are rising amid the scare.
Shares in Asian businesses that make rubber gloves and other surgical equipment have been boosted by the outbreak of a deadly coronavirus in China, as traders look to cash in on the epidemic.
The disease has killed more than 40 people and infected 1,400 more in China, while cases have been reported in the U.S., Japan, France, South Korea, Macau, Taiwan and Thailand. China has quarantined the city of Wuhan, the epicenter of the outbreak and home to 11 million people.
News of the first cases of human-to-human transmission of the pathogens hit equity markets this week, with fears mounting as more than 100 million Chinese people prepare to travel for the Lunar New Year holiday.
[Top Glove’s] products act as inexpensive protective barriers, which could see a surge in sales should the outbreak continue to deteriorate at a global scale, leading to a pandemic.
But the outbreak has also seen investors pile into stocks such as Malaysia’s Top Glove, which manufactures more than 70 billion pairs of rubber surgical gloves a year. The company’s Kuala Lumpur-listed stock has climbed almost 14 percent in the past two days, boosting its market capitalization by $370 million.
The company’s “products act as inexpensive protective barriers, which could see a surge in sales should the outbreak continue to deteriorate at a global scale, leading to a pandemic,” say Citi analysts led by Megat Fais.
Kossan Rubber Industries and Supermax Corporation, two other Malaysian companies that make latex gloves, jumped more than 6 percent and 8 percent last Wednesday, respectively.
The outbreak of the coronavirus in Wuhan has drawn comparisons with the 2003 SARS crisis, which killed 800 people after officials initially attempted to cover up the scope and severity of the epidemic.
Investors have responded to the rapid increase in known infections by buying shares in companies that could benefit from higher demand for medical products. Shanghai-listed Zhende Medical, which makes medical supplies, has risen by more than 33 percent last week.
Kinger Lau, chief China equities strategist at Goldman Sachs, points out that the composition of the country’s stock market is more robust than during the outbreak of severe acute respiratory syndrome in 2003. A much larger component of the index is now made up of companies involved in sectors such as health care, Lau adds.
Strategists have said that the rising share of consumer spending that is done online could mitigate the effects of shoppers staying home out of fear of catching the virus.
The Hong Kong-listed shares of Chinese e-commerce group Alibaba climbed 1.8 percent on Wednesday, beating a 1.2 percent gain for the Hang Seng Index.
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