財經觀察 2004 --- Garthwaite on Swine Flu

Garthwaite on Swine Flu

Key messages:
1. How big? Dr. John McCauley, virologist at the National Institute for Medical Research, believes the estimate of 120mn fatalities from the crisis is "not unreasonable" (NM: that is ~2% of global population, and given that mortality is ~2% for swine flu, the math does not add up). Garthwaite has no estimate, but highlights the Spanish flu pandemic
(1918-20) killed 50mn people (2.5% of world population) - could have been exacerbated by WWII and limited medical facilities. SARS had ~10% mortality, but infection was checked at 8,437 people.
 
2. Economic Impact? In Oct-08 World Bank estimated that a "mild" pandemic like the HK flu of 1968-69 would reduce global GDP by 2%, and a more severe one like the Spanish flu by 4%. Of the total economic impact, 12% is impact from higher mortality, 28% from illness, and 60% from efforts to avoid infection (reduced air travel, shopping, etc). Garthwaite thinks the World Bank has overestimated the impact.
 
3. Stock market impact? During SARS HK underperformed global markets by 15%, and relative performance did not trough until 2.5 weeks AFTER the number of new SARS cases peaked, and 2 months BEFORE the WHO declared SARS was contained (see chart below). Garthwaite believes if concerns rose to SARS type levels (which he thinks is unlikely), markets could fall 10-15%.
 
4. Sector impact? During first part of SARS, worst performing sectors were travel, hotels and retailing. Then food producers performed badly (earlier SARS was considered bacterial - spread of infection concerns). Real-estate underperformed because buyers refused to visit properties (I know at least one person in HK who made a great purchase during SARS!). Winners were utilities, drugs and telecoms. Companies that gain from people working from home should also do well.