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Analysts: What If MERS Hits Singapore
Aspire, Investments | 17 June 2015
By: Vance Wong
Articles (74) Profile

Source: Medical News Today

The Middle East Respiratory Syndrome (MERS) outbreak in South Korea has claimed the lives of 19 people and continues to threaten the population there. According to the Agence France-Presse (AFP), there are a total of 154 confirmed cases with more than 5,500 people in quarantine in South Korea.

In a recent interview with Asian journalists, Prime Minister Lee Hsien Loong felt that MERS would ultimately hit Singapore. Analysts agree and contend that MERS would likely negatively affect the aviation industry, particularly airlines, almost as much as during the previous SARS outbreak.

Staples & Healthcare To Perform; Aviation Weak

CIMB analysts think that the staples and healthcare sectors would perform well in China if there is MERS outbreak, because of their historical performances during the SARS period. There is a high chance that Singapore would face similar impacts on its respective sectors once MERS hits us.

Nevertheless, CIMB pointed out that the general performance of the China market was highly dependable on the severity of SARS, suggesting that the same would happen for MERS too. Similarly, Singapore should expect this to happen once the first local MERS case is confirmed and a quarantine programme begins.

As one would imagine, the first sector to get hit will be the aviation industry, particular airlines. Inevitably, as the aviation industry weakens, tourism, hospitality and the retail sectors could see declines as well.

Tourism Arrivals Will Drop Further

Looking at the chart above, the tourism sector in Singapore has been weakening even before MERS hit South Korea. Investors can expect the tourism sector in Singapore to continue declining as the spread of MERS worsens in the Asian region.

As tourism weakens, the other sectors like hospitality and retail that tie in closely would see a decline as well. While the government has mentioned that it will take adequate steps in a MERS outbreak, the economic repercussions will nevertheless be substantial.

Investors should definitely avoid having a huge position in these sectors that would certainly be negatively affected.

Expect Weak Near-term

Although the Singapore Straits Times (STI) Index had just recovered from a minor correction last week,  Analysts warn about a near-term weak outlook for Singapore’s stock market as it climbs a “wall of worries”.

Analysts from DBS Vickers pointed out that a prominent worry in the near-term on top of MERS is the uncertainty of when the US Feds will raise interest rates. As such, investors should shy away from long-term investments till the MERS situation settles down.

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

Please click here for more information about this author.

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