Emerging Markets at Historical Highs Before BF

[sharon sanders]

The asset prices in emerging markets are at historically high valuations. The link is a report that shows the growth in the prices of : bonds , equities, and exchange rates. It also shows the growth of private capital flows into emerging markets and discusses the declining credit ratings there. Much of the world's wealth has been invested there to take advantage of the relatively high rates of return, including hedge funds. A pandemic will financially decimate this investment arena.

http://www.bis.org/publ/qtrpdf/r_qt0603a.pdf

[sharon sanders]

Re: Emerging Markets at Historical Highs Before BF

Bird flu would ravage Asian markets: report


ANGELA BARNES
Globe and Mail Update
Asian markets outside of Japan are vulnerable to big declines should an avian flu pandemic occur in the region, Citigroup Global Markets Inc. says.
?We believe Asian ex-Japan markets are pricing in very little bad news, so a potential outbreak of H5N1 avian flu could lead to substantial market declines,? Citigroup said in an extensive report that outlines various potential avian flu scenarios and possible winners and losers among market sectors.
Some Asian markets took substantial hits ranging from 5 per cent to almost 10 per cent during the SARS outbreak of 2003 but have risen substantially since then.
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Should an avian flu pandemic emerge, ?airlines, hotels and luxury goods stocks in the initially affected area will likely be the first to suffer from cancellations, falling sales and a rapid move to net losses, as with SARS,? Citigroup said.
Accordingly, the global team that wrote the report see companies such as American Airlines Inc., Qantas Airways Ltd., Hilton Hotels Corp, Nieman Marcus and Tiffany & Co. as potential losers in that scenario, along with a number of insurers and shopping mall operators.
On the other hand, drug companies that make anti-virals, such as Gilead Sciences Inc. and GlaxoSmithKline PLC, vaccine makers such as France's Sanofi-Aventis Group and hospital chains including Tenet Healthcare Corp. should benefit, the brokerage firm said.
So too should cleaning product suppliers such as Clorox Co. and Reckitt & Colman PLC. Home entertainment providers including Nintendo Co. Ltd. and Blockbuster Inc. also stand to benefit as people stay indoors more, the team suggested.
If a pandemic were to spread beyond Asia, some sectors and companies will be less affected than others. ?Those most affected include the travel and hospitality industry, oil stocks and mining and metals companies,? the report said. Cyclical sectors such as pulp and paper and chemicals would also likely suffer.
Meanwhile, telecom companies including Deutsche Telekom AG, internet commerce including eBay Inc. and Google Inc., utilities and defensive sectors including the pharmaceuticals made the potential winners column in a spreading pandemic scenario.
The Citigroup team consider avian flu a rising risk to the global economic outlook. The best case scenario is that the H5N1 avian flu virus doesn't mutate so it can be transmitted to humans; the worst is that avian flu becomes a global pandemic, Citigroup said. Should a pandemic occur, the economic impact will be determined by the severity of the pandemic.
?If the pandemic is mild, we would expect the world's health authorities and scientists to be able to master it, like SARS or the 1968 influenza pandemic,? the team said. In that case, the economic impact could only be short term. ?We would expect economies to bounce back from the temporary disruption, equity markets to rally (potentially quite strongly), and bond prices to reverse,? the report said.
Everything changes in the case of a more virulent pandemic. ?We would expect global economic activity to decline, raw material prices to collapse, risk aversion to rise, monetary policy to ease and interest rates to fall,? the report said.