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Ebola and stock market

Accendo Markets
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The first reported case in the Ebola outbreak in west Africa dates back to December 2013, in Guéckédou. Travellers took it across the border: as of December 14th, 18,603 cases and 6,915 deaths had been reported worldwide. The most severely inflicted countries are three: Guinea, Liberia and Sierra Leone.

With a fatality rate of over 70%, Ebola will continue to hamper the economy, especially through reduced air travel, slower production in western Africa. The UN predicts that Ebola will shave off at least 2% of the country’s GDP. Even the strongest economy has been affected. The arrival of Ebola in the U.S. brought extreme turbulence in the stock market, 8% drop from record highs. The deadly virus is clearly not the only factor behind the market slide, but it’s a major unknown that is increasingly weighing on market psychology. The unsettling market made players all around the world at edge.

Some sectors are especially affected. Ebola fears are most obvious in First of all is the airline sector. Shares of American Airlines Group(NASDAQ:AAL) and Delta Air Lines (NYSE:DAL) fell sharply, hurt by the news that the new Ebola patient flew the day before being diagnosed. Both airlines are down nearly 20% over the past few months. Other sectors being caught in the Ebola downdraft include the cruise industry, where Royal Caribbean Cruises (NYSE:RCL) and Carnival (NYSE:CCL) have tumbled nearly 20% from their 52-week highs. Hotel stocks like Hilton Worldwide (NYSE:HLT) and Starwood Hotels & Resorts Worldwide(NYSE:HOT) have also been punished by the Ebola concerns.

However, the market plays a pain and gain game. There are some niche industries boosted by the epidemic. Hazmat-suit companies are soaring as demand is through the roof. As of October 23rd, shares of Lakeland Industries Inc. (NASDAQ:LAKE) and Alpha Pro Tech Ltd. (APT) were up 142% and 130% respectively since August 1st. These companies are likely to continue to perform well because hazmat suits can only be worn once before they are discarded and entry into these industries are not possible within short term. Drug makers focusing on Ebola treatments are also performing well. Tekmira Pharmaceuticals (NASDAQ:TKMR) , which is developing a vaccine for the virus was up 125% on the year to October 23rd.

The economic cost might be short-lived and could be erected by many other factors, however, the indirect costs of public risk aversion can generate far more economic damage than the direct cost of healthcare outlays and other containment expenditures. The World Bank predicts that as much as $32.6 billion, will be shaved from the pan-West African economy if the crisis continues for two years. For the rest of the world market, the global economic slowdown might be a greater altering force, but more contagious than the disease itself, is the economic contagion of Ebola from west Africa to the rest.

“Annie Zeng is a final year PhD candidate in Pharmacology at the University of Cambridge, UK. She joined Accendo Market’s team covering Life Science sector as an analyst.”

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