Advertisement

Equity strategy reduced to counting chickens and eggs

Reading Time:2 minutes
Why you can trust SCMP

It is difficult to avoid the avian flu scare these days and foreign investors also need to be updated as regional stock markets lurch under each daily assessment of the pathogen's progress.

The earnings season has been replaced by the flu season and virus estimates rather than corporate news dominate the morning call. Trying to accurately gauge the impact on the equity market is hard but brokers have to try.

Covering all bases is good policy and investment bank ING Barings left few stones unturned in a recent strategy update. As well as voicing an understandable call for pharmaceuticals to outperform airlines, it provided a cross-section of medical opinion on the likely spread of the disease and some alarming numbers on worst-case potential fatalities - 207,000 deaths and 734,000 patients in hospital is the pandemic forecast by one medical expert.

Advertisement

If investors are not scared off by this point, an accompanying report takes a more measured approach, with a headcount of chickens across the region. Indonesia, the Philippines and Thailand are highlighted as having been the largest per capita chicken producers in 2002, although China's US$5 billion output is by far the largest nominal figure.

The irony that sophisticated equity strategy has been reduced to counting chickens is noted but one omission stands out. While counting your chicks before they have hatched is foolhardy, not counting your eggs at all must be an oversight.

Advertisement

As flu and cullings kill tens of millions of chickens, broilers and layers alike, even eggs are becoming scarce. Bakers in Thailand complain that a shortage of eggs means they cannot make cakes and China is no longer exporting eggs to Hong Kong.

It is these unpredictable ramifications that analysts now have to forecast, with substitute products and producers gaining, while others see markets disappear.

Advertisement
Select Voice
Choose your listening speed
Get through articles 2x faster
1.25x
250 WPM
Slow
Average
Fast
1.25x