January 20, 2020 / 4:59 AM / 2 months ago

Chinese investors dump tourism stocks, chase drugmakers as coronavirus spreads

SHANGHAI, Jan 20 (Reuters) - Chinese investors dumped tourism stocks and bought drugmakers and facial mask producers as coronavirus spread to more cities, raising concerns of its containment and clouding travel plans of millions of Chinese for the Lunar New Year holiday.

Authorities reported 139 new cases of pneumonia caused by the coronavirus strain over the weekend, including a third death.

Major hotel operators BTG Hotels Group Co and Shanghai Jin Jiang International Hotels Development Co tumbled over 7% on Monday morning, while tourism company Songcheng Performance Development Co slumped over 8%.

Drugmakers such as Jiangsu Sihuan Bioengineering Co and Shandong Lukang Pharmaceutical Co jumped by their 10% daily limit.

The stock-picking pattern is similar to the one observed during the outbreak of the Severe Acute Respiratory Syndrome (SARS) in 2003, but future trends hinge on whether the virus could be contained.

“If you look at how investors reacted to SARS, today’s outbreak certainly gives a short-term boost to drugmakers and facial mask producers,” said Wu Kan, head of equity trading at Shanghai-based Shanshan Finance.

The new virus, first reported in the Chinese city of Wuhan late last year, belongs to the same family of coronaviruses that causes SARS, which killed nearly 800 people globally during a 2002-2003 outbreak that also started in China.

Brokerage firm Guolian Securities identified biotech firms, including Autobio Diagnostics and Guangzhou Wondfo Biotech Co, as beneficiaries from the epidemic.

An index tracking biotech shares rose over 1%, while a gauge tracking hotel operators slumped over 6%.

Companies involved in the making of facial masks surged on higher demand prospects for these products.

Tianjin TEDA Co, a major producer of materials used in facial masks, jumped over 9%. Textile maker Shanghai Shenda Co rose over 4%. (Reporting by Samuel Shen and Brenda Goh; editing by Uttaresh.V)

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