COVID-19 Stocks Resurface as Asian Infections Rise
The recent resurgence of COVID-19 infections in Asia has sparked renewed interest in COVID-19-themed stocks, with companies specializing in testing kits and treatments seeing a surge in their share prices. This surge is being driven by a combination of factors, including increased demand for testing and treatment, as well as a rise in hospitalizations.
The Surge in COVID-19 Cases
The number of COVID-19 hospitalizations in South Korea, for instance, has nearly doubled each week over the past four weeks, rising from 226 in the third week of July to 1,357 in the second week of August. This surge in cases has led to shortages of self-testing kits and related medicines, prompting South Korea's disease control and prevention agency to secure additional drugs and roll out vaccines for high-risk groups in October.
The Impact on COVID-19 Stocks
This resurgence in COVID-19 cases has led to a sharp rise in the stock prices of companies involved in the production of testing kits and treatments. In South Korea, Woojung Bio, a firm specializing in infection control, saw its stock price hit its highest level since 2023, with an 88 percent increase this month alone. Genematrix, a producer of COVID-19 testing kits, experienced an even more dramatic increase, with its stock price soaring over 142 percent within the month.
Cautionary Notes
Despite the recent surge in share prices, experts are cautioning against making blind investments based purely on speculation. They highlight the volatility of these stocks, particularly those of smaller companies with low trading liquidity. Furthermore, the long-term sustainability of this trend is uncertain, as many analysts believe that the current outbreaks are unlikely to evolve into another global pandemic.
Minyue Liu, an investment specialist for Asian and Greater China equities at BNP Paribas Asset Management, believes that while COVID-19-related stocks may experience short-lived outperformance, the gains are likely to cool down as the pandemic situation stabilizes. He points out that these companies often rely heavily on COVID-19-related products, which account for a relatively small percentage of their overall revenue. As a result, the recent surge in demand may not have a significant impact on their earnings.
The Future of COVID-19 Stocks
While some companies, such as those producing COVID-19 treatments, may experience short-term benefits from the recent rise in infections, the long-term outlook for COVID-19-related stocks remains uncertain. The pandemic continues to evolve, and the emergence of new variants or changes in the public health landscape could significantly impact the demand for COVID-19-related products. Investors are advised to exercise caution and carefully consider the risks before making any investment decisions.
The pandemic's ongoing impact on the global economy and public health makes it clear that we are still living in a world shaped by COVID-19. While the current situation may seem like a resurgence of a past threat, it serves as a reminder of the importance of preparedness and adaptability in the face of uncertainty. The future of COVID-19-related stocks, like the future of the virus itself, remains to be seen.
