banks advising-risk of bird flu

citigroup advising clients of the different scenarios

Bird flu to hit markets
From: Agence France-Presse By Chris Jones
November 30, 2005

STOCK market investors have been told to start thinking seriously about their portfolios, with a long-feared human outbreak of bird flu now appearing almost certain.

Among those investment banks which have begun advising clients about stock market bird flu plays is Citigroup, which has laid out a flowchart of possibilities and risks which would result from a pandemic.
According to Citigroup, the key question for investors is how many people would catch and die from the feared – but now expected – human transmissable form of bird flu.

The investment bank said the extent of the outbreak was key to any pandemic-related investment strategy.

While a mild pandemic would likely be quickly dealt with by health authorities, Citigroup said it would spark an initial sell-off in airlines, luxury goods makers, hotels, insurers and shopping mall companies followed by a quick rebound.

This provided an opportunity to buy into the oversold stocks when they bottomed out.


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On the flipside, stocks to immediately benefit from a mild pandemic would be drug companies, hospital chains, cleaning-product makers and home entertainment providers.
But any stock price appreciation in these would be likely to quickly subside once the threat eased, meaning they should only be seen as short-term buys in such a scenario.

A virulent outbreak, on the other hand, would demand a different investment strategy, Citigroup says.

Rather than presenting an almost immediate buying opportunity, a major outbreak would lead to protracted weakness on the financial markets as the fundamentals deteriorated.

It would put a swift end to all unnecessary international travel (sparking a fall in airline and tourism related stocks) and force people to stay at home rather than mingle in pubs and restaurants (hurting stocks with exposure to malls, pubs and casinos).

Central banks would then come under intense pressure to ease interest rates aggressively to shore up their economies, flowing through to a second wave of stock sell-offs as declining economic activity hit home.

But under such a worst-case scenario, telecommunications companies would join the list of winners as people called their friends and relatives rather than travelling to see them.