Shanghai Daily news

Avian influenza, which is now spreading in at least 10 Asian countries and regions, is causing less hiccup in China's stock market than was expected. This is due to the low exposure of the country's economy to the poultry processing sector.

Shanghai's stock market has risen by more than 3 percent since it re-opened trading in the Year of the Monkey on January 29, two days after China reported the first case of bird flu in Guangxi Zhuang Autonomous Region.

The shenzhen stock market gained 1.9 percent in the period.

The bullish sentiment stood in contrast to the run-up to the SARS crisis at the end of April last year, when China's stock markets fell after Beijing admitted it under-reported the number of SARS cases.

The impact of the bird flu on the stock markets is different from the detrimental effect caused by SARS, which killed 774 people worldwide, according to a recent analysis report from Netherlands-based ING.

"We believe it (the bird flu) to be different and, as things stand, the impact on Asian economies is substantially lower," said the report. "Total chicken meat production in all Asia amounts to only 0.4 percent of the region's Gross Domestic Product. SARS affected consumption, which represents roughly 66 percent of the region's GDP."

Chicken production contributes only 0.41 percent to China's economy, which is mainly propelled by industrial output, exports and investments, according to statistics from ING's report.

Given the current situation, direct victims of bird flu are only the companies that are engaged in the poultry processing industry.

China's stock markets have remained unscathed by the bird flu, largely due to the low weightage of the agriculture in the publicly traded companies.

The companies that represent the agricultural sector account for approximately 1 percent of the 1,000-plus firms that trade shares on the Shanghai and Shenzhen stock markets. Stocks that have poultry processing as the major business operations are even fewer.

Shanghai dajiang Stock Co Ltd, a Shanghai-listed poultry processor, said in a statement yesterday that the ban imposed by Japan on the exports of Chinese poultry will hurt its sales. The company sells to Japan 80 percent of its chicken products that are exported.

But the broader market is still at risk amid the heightened concern that the bird flu virus will jump to human and then swap genes with the common flu virus.

If that happens, the bird flu will become a more dangerous infectious and killer virus, being transmitted in a human to human way.

"If that is the case, the stock market will be undoubtedly in for a tough time," said Wei Wei, a trader with West China Securities Co Ltd. "But given the experience of containing the SARS, I do not see a big possibility of a massive outbreak."

So far, the bird flu disease has already claimed 12 lives in Thailand and Vietnam.