April 5, 2013

China's bird flu drops poultry firms' income, lifts vaccine shares

As the H7N9 bird flu scare in eastern China triggered speculation that Beijing could order a cull to prevent an epidemic, vaccine shares rose while mainland poultry companies declined on the stock market.

Four people in Jiangsu province were reportedly fighting for their lives after it was confirmed they were infected with the virus while the eastern city of Hangzhou confirmed two cases of H7N9, Beijing News reported last night.

Several poultry and poultry products companies have reported drop in their revenues due to the outbreak of H7N9 bird flu.

"This is panic selling. Poultry stocks may fall further in the coming days if the flu keeps spreading," said Linus Yip, market strategist at First Shanghai Securities.

But Yip added that long-term investors did not need to worry too much about the flu as the impact on stocks might be temporary.

"Long-term investors should actually consider some bargain hunting in solid food company names after any sharp fall," he said.

Concern over the new bird flu variant has mounted following news of the deaths of two men in Shanghai and that of another patient who died in a hospital in Hangzhou city. A woman from Anhui is also said to be critically ill.

The bird flu outbreak has prompted Vietnam to announce a ban on poultry imports from China.

Some stocks appeared to be benefiting from the flu jitters, however, with vaccine producers surging on expectations that demand for their products will spike.

Guilin Layn Natural Ingredients, which sells compounds used by the pharmaceutical industry, rose by the daily limit of 10% to finish at CNY19.24 (US$3.10). Shenzhen Neptunus Bio- engineering, which produces biochemical medicine, also rose 10% to finish at CNY9.48 (US$1.53).