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Too early to gauge effect, experts say

By Zhang Ran (China Daily)
Updated: 2009-04-29 07:44

Fears that a swine flu outbreak could turn into a global pandemic dampened China's market sentiment, yet economists said it was still early to tell how much it was going to affect the country's real economy.

The spread of swine flu roiled the Chinese markets from stocks to commodities, as traders worried that consumers would cut down on travel and food perceived to be less safe, because of the outbreak.

Though the country has reported no confirmed cases of swine flu so far, Chinese stocks dropped for a second day with investors fretting about the potential economic fallout if the virus outbreak becomes a full-fledged pandemic.

Related readings:  Official: No swine flu case in NW Chinese province  Hu calls for stepped-up efforts to prevent swine flu  Chinese cancel US tour plans  China on alert to prevent swine flu infection

The Shanghai Composite Index ended at 2401.44 points, dipping 0.16 percent to their lowest close in nearly three weeks, although pharmaceutical stocks surged for a second day.

Drug makers and producers of face masks got a boost on an expected increase in demand, while airlines extended losses on worries the flu will cause a sharp reduction in travel around the world.

The commodities market was faced with the same situation. Futures of soybean slipped heavily by 1.32 percent, copper dropped 1.93 percent and fuel oil slumped as much as 2.1 percent on assumed dropping demand.

"The swine flu has changed people's outlook about the recovery of the world economy. Apparently, the assumed shrinking demand for energy and commodities has brought gloom to the Chinese market," Xu Lili, analyst, Bohai Securities said.

Zhao Zhou, an analyst at Changjiang Securities, warned that the depressed sentiment would continue until the flu was controlled.

However, the flu has shown limited signs of affecting the daily consumption of Chinese.

In an Ito Yokado department store in downtown Beijing, many people were still buying pork for their dinner.

"I heard the news (of swine flu), but this has not changed my eating habit so far," Zhu Lilian, a 64-year-old retired woman, told China Daily.

"The swine flu outbreak is still at an early stage although it has already spread to many countries. For industrialized economies such as the Asian tigers, weak confidence may be a bigger threat than the disease itself," Sherman Cha, an economist at Moody's Economy.com said.