I suggested that Motley Fool open a board on this topic, and I promised Cor I would post when I caught up on the AMD board. (Lots of posts there due to the Opteron introduction.)First the question of whether SARS will affect the US economy and the stock market has been answered in the affirmative. Of course, the airlines have been the first to suffer, as if they needed more suffering:The staggering airline industry is especially hard hit by the outbreak.The Air Transport Association said that SARS was a factor in the decline in airline traffic in the Easter and Passover week, with declines especially pronounced to Asian destinations.(from: http://sg.biz.yahoo.com/030423/1/3abeo.html)What about other industries? That depends on the progress in limiting the spread of SARS. Right now I am assuming that it will continue to get worse in Hong Kong and mainland China before it gets better. The Vietnamese outbreak seems to be contained, as do most of those outside of China, with the exception of Toronto, Canada. Not that Canada is not trying hard. When it comes to new diseases, even as hard as possible may not be hard enough. China is taking SARS seriously now, but it may be too late to avoid widespread outbreaks. Or to put it differently, even if through some miracle SARS transmission stopped tomorrow, the situation in China would get much worse during the next week to 10 days.With that background what will be the effects on specific industries? Sales of clothing made in China have not yet been affected, and whether or when they will is probably up to random chance right now. Most clothing is shipped by sea, with supply chains months in length. There are lots of ships at sea right now carrying clothes made in China. If someone, or several crew members on a ship come down with SARS, the ship may be admitted to the US or some other port without quarentine--if it has been at least ten days since the last new case on board.And that is probably the first effect we will see. Some ships will be quarentined because of SARS among the crew, but it won't be a big deal. Eventually though ships will prefer to avoid cargos that require them to dock in Hong Kong or mainland China. If and when ships start asking too much to go to China, or won't accept Chinese cargos at any price, that will have a huge effect. Has that started? Probably. But most ship owners can't be that choosy, and will probably be satisfied to keep their crews on board--and possibly not buy some types of fresh produce and especially poultry in China.The effect on the electronics industry will depend on the progress of SARS (or against SARS) in Taiwan and Singapore. Right now those statistics look good. There have been outbreaks in both places but the public health measures taken, if draconian in nature seem to have things under control, if barely. See: http://asia.news.yahoo.com/030423/ap/d7qj39a03.html and http://www.taiwanheadlines.gov.tw/20030414/20030414s2.htmlSo China's economy will be trashed no matter what. The effects on economies outside of mainland China and Hong Kong so far has been restricted to airlines. Shipping and clothing sales may be affected as the situation in China gets worse, but with the special exception of Toronto, the rest of the world is so far getting off lightly.Unfortunately, the key words in the previous paragraph are so far.Is there any silver lining to SARS for any sector? Hospitals are seeing more business, but hospital staffs have been among the worst hit by SARS, and some hospitals and emergency rooms have been closed as a consequence. No easy money to be found there. Similarly, if SARS becomes pandemic, some pharmaceutical company will eventually make money off a vaccine. But developing a vaccine in the near future isn't going to happen, and the same for almost any drugs to treat SARS patients.Even if a vaccine or treatment were to be available today, the total demand would be small. The discoverer would get lots of good press, and maybe a Nobel Prize. But any stockholder benefits would occur if there was a large demand--and if SARS becomes a world-wide epidemic all stocks are going to get pretty badly punished.So as far as I can see, only bears are likely to benefit from SARS.
Hey eachus, good post! Lots of different conclusions from the ones I came to, but they all look reasonable to me. And it looks like we both came to this sad conclusion:So China's economy will be trashed no matter what.
And it looks like we both came to this sad conclusion:So China's economy will be trashed no matter what.As long as you remember that the effect in Taiwan is questionable, yeah, that is pretty obvious. Taiwan does do a lot of business with the mainland, but mostly restricted to areas near Taiwan. I think it will come to some of those areas being sufficiently agressive to contain or keep out SARS, and others that Taiwan will quarantine. Those two categories are definitely not exclusive, and it is always going to be possible for another vector from the mainland to get to Taiwan.Which is why I focus on containment. In areas where people are proactive, wash their hands frequently (or even more often), stay home if they are sick, and where hospitals take keeping an antiseptic environment seriously, the disease will be contained. New infections will pop up in clusters and die out.It may be that the silver lining in this will be sales of disinfectants. Now that it is known that surfaces can be infectious for up to 24 hours after being touched by someone with SARS, hospitals are going to have to be much more agressive in disinfecting public areas, and rooms between patients.As for China, what they have to do, and will probably do too late is to quarantine infected cities. Stop air flights from airports in infected cities, probably do the same for intercity train travel, and limit long distance travel to that which is necessary. All that won't stop the spread. You need very proactive public health measures to do that. But it may slow it enough that only a few regions at a time are seriously affected. The alternative seems to be the world closing its doors to China, and coming back when a vaccine is developed and a significant fraction of the Chinese population has died.Incidently, the most recent Hong Kong story I saw was encouraging. What it said that ordinary citizens were cleaning up the filthy alleyways that are such a commonplace part of the city. If it really is being spread by cockroaches, doing that for your local community will reduce your chances of becoming infected. Worth a try.
Textiles: ----- China's loss is India's gainWhile India's market share in the world textile industry is just 4 percent, in comparison to China's 32 percent, the SARS crisis has resulted in a lot of China's trade being redirected to India. Anil Sharma examines what this means for Indian manufacturers, while Sam Ng explains how the Chinese are struggling to come to terms with their loss. Indians reap double benefithttp://www.atimes.com/atimes/South_Asia/EF10Df02.html Chinese count the costs http://www.atimes.com/atimes/China/EF10Ad03.html;o)
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