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Swine Flu Hogged News, Investors Barely Sneezed
Malaysia Perspective | 15 June 2009

Unlike previous epidemic outbreaks, investors appeared unfazed by the outbreak of the Influenza A virus subtype H1N1, the official name for swine flu. When news of the A/H1N1 outbreak from Mexico started dominating the headlines, global markets took a dive.

The global markets fell due to travel-related counters and plantation stocks. Fears of a drop in demand for livestock feed also dragged down CPO prices.

The KLCI dipped as low as 966 (on 28 April) as news of the outbreak gained momentum. However, it recovered within days and continued its rally through May to end the month at 1,044 points.

OSK Research said the markets’ fall was likely because investors had been looking for an excuse to take profit and the outbreak provided the right cue.

“While we do not wish to downplay the severity of the epidemic, we feel that concerns have been overblown,” it said in a report, noting that governments worldwide acted quickly with containment measures.

Chris Eng: Unlikely that A/H1N1 will get far
Chris Eng: Unlikely that A/H1N1 will get far

The danger to Asia should be limited as the region learned to deal with the Severe Acute Respiratory Syndrome (SARS) and bird flu epidemics in 2003. “With better monitoring and control since the SARS outbreak, it is unlikely that A/H1N1 will get far,” OSK Research associate director Chris Eng told Shares Investment (Malaysia).

“The mortality rate seems much lower, and although it may be easier to spread, [people] generally felt it to be less of a threat,” he added.

SARS hit the travel and leisure sectors hardest as people decided to cancel their travel plans and stay indoors. In the case of H1N1, although there was some impact on long distance travel due to cancellations and fears of being quarantined, load factor numbers have not been hit that hard, he said.

“We have upgraded our KLCI fair value for 2010 to 1,150 points from 1,118 points previously,” Eng said. “There could still be some strength left in the market as we head towards Invest Malaysia on 30 June and 1 July, but if the market approaches 1,150 points, we would call a Sell, while any retracement below 950 would be a Buy.”

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