Swine flu pandemic and the impact on global stock markets
Swine flu pandemic and the impact on markets World stock D
                                                                            SUNIL KEWALRAMANI
                                                                                    September 12, 2009
The correlation of gamma? has been used by financial engineers of Wall Street loan to calculate the "mortality" rates, which some punishment created significant business securitization (CDO, CLO, CPDO, SIV). It is interesting noted that the mathematical theory has been thrown together in epidemiology, namely the study Communication Viral Diseases spread. Ironically, securitization and swine flu pandemic are a matter of serious concern for the world today.
The tentative conclusion is that the latter is a pandemic œmoderateâ € €: less severe than the Spanish flu of 1918, more consistent with that of 1957, and perhaps up to four times as dangerous as a virus typical seasonal flu, which kills year about 500,000 people worldwide.
In Mexico, which had 14,800 cases and 138 deaths, swine flu can hit 0.3 to 0.5 percent of GDP this year, according to the United Nations Economic Commission for Latin America and the Caribbean. Â Firm Ernst & Young Item Club, a forecaster, warned that the swine flu could cost the UK up to 3 percent of GDP this year and 1.7 percent next. If all goes reasonably well, the epidemic will probably hit about half a percentage point of world GDP. If things deteriorate, it could cause a contraction of 1.3 to 1.5 per cent drop.
 WJ McKibbin and AA Sidorenko € ™ s 2006 research paper on global macroeconomic consequences of pandemic influenza finds that â € œeven a mild pandemic has significant consequences for the global economy € output, cost close to 0.8% of GDP world. The World Bank estimates that the negative impact on GDP in South Asia because of the pandemic will be 0.6% if the outbreak is mild.
Pandemics over â € "Spanish influenza to SARS.
The Spanish flu occurred in two waves during the 1918-1919 killing A around 50 million people worldwide. It is estimated that 10 to 17 million are dead in India alone contribute to sharp drop in economic activity. According to economic historian Angus Maddison, Indiae € ™ s GDP decreased from 12.8% in 1918.
  The Asian flu of 1957-1958 was also folded in two waves, killing 1-2000000 people worldwide. The SARS epidemic was fortunately less serious, lasting only a few months and ask for an estimate 774 lives. as traumatic as SARS was in terms of human impact, the markets barely reacted.
The 1918 Spanish flu pandemic that killed tens of millions, went down with devastating virulence of a world ravaged by four years war. The swine flu pandemic of 2009, by comparison, has arrived when the world was largely at peace, but when the economy World is the most vulnerable and what appears as green shoots may wither at any time.
Impact of SARS on the economies Asian: tourism (visitor arrivals) and the growth of retail spending fell sharply in negative for 1-2 quarters during the epidemic SARS. The IMF estimated that the East and South Asia has lost almost 18 billion USD in demand and business revenue due to SARS.  the height of the SARS panic in February 2003, Singapore and Hong Kong reported July declines month / retail sales of -35% and -27.5% in Hong respectively. Kong retail sales during the year terms have not returned to positive growth until early 2003.   In response, governments Asian rescue package together to prevent and contain the problem and to help firms with cash flow problems. Malaysia, for example, spent more than 2% of GDP in May 2003.  Hong Kong and Taiwan have spent about 1% and 0.5% respectively on similar aid packages.
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Impact stock market
Despite the widespread social and human impact of SARS, there was little impact detectable on the stock market recovery in 2003. Asian Equities ex-Japan (using the MSCI Asia Pacific excluding Japan as a proxy) has continued on its recovery off lows of 2003 (see chart below please). Â
: MSCI Asia Pacific excluding Japan during SARS part
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On course there are significant differences this time â € "the global economy is clearly in a weaker state today than in 2003. The risk asset markets are clearly more vulnerable today than in 2003. It's crucial that the unknown â € "is This epidemic is developing into a pandemic more serious than SARS in 2003 or like the Spanish flu of 1918?
I did an analysis of case scenarios, the worst to determine the impact of swine flu may have on markets Global equity, looking past the priority.
Spanish Flu of 1918 and the market
Spanish flu 1918 was AA global influenza pandemic that has affected nearly half the world population at the time (or up to one billion people).  The 1918 epidemic was the worst of the 20th century, and he fell under the subtype H1N1, which is the same subtype as the current swine flu outbreak. It is estimated that the 1918 flu killed anywhere from 20 to 100 million people, which would have equaled a rate Havea mortality of 2.5% to 5% of infected persons.
Here is a table on the 1918 flu which highlights deaths per 1,000 people infected influenza and / or pneumonia, and superimposed is a graph of the Dow Jones Industrial Average. There were three waves pandemic of 1918-1919, with the worst From October to December of 1918. Following the wave of the pandemic first, the market sold a little bit, but then rallied over the summer months before filling prior to the wave.  The second market trend downward during the worst wave of the epidemic of influenza, but it is down 10.9% from peak to trough, and then rallied significantly during and after the third wave. the First World War was also nearing completion in late 1918, so that the end of the pandemic and war have probably contributed to the event subsequent inventories.
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The correlation between economic recession and the pandemic appears to be very high. Crisis Economic last hit in 2001 with the dot com bubble burst and telecommunications and has been immediately followed by 9 / 11, then the SARS crisis in Southeast Asia and anthrax cases in the United States.
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As you can see in the chart of the MSCI World Stock below, there are similarities between SARS in 2003 the epidemic and Todai € ™ s flu epidemic.
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 Source: Www.socioeconomics.net
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Here is a list of avian flu outbreaks in Asia plotted against the price of Hong Kong Hang Seng stock index, a measure of social mood of Asia. Â As you can see, avian influenza have occurred in a downturn in the stock market:
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Source: Elliott Wave
So is it a coincidence that the first cases of swine influenza in Mexico have been reported in early March, when global stock markets have been struck down they had not seen for years or decades?
If plays like swine flu epidemic SARS in 2003, the Market € ™ s focus is likely to remain on how the world will be back on a growth trajectory. And if this outbreak appears be one that can be contained in a few months, the market will remain more focused on how the Chinese and India's growth story may save the world from a deep recession. A Or if there is a bubble in Asian manufacturing.
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Sunil Kewalramani is Wharton Business School MBA and Chief Investment Officer, Global Investors Money
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About the Author
Mr Sunil Kewalramani is a Wharton Business School MBA, a CPA, CA and a leading consultant for multinational companies on global asset management, strategic planning and cross-border mergers and acquisitions
