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Stocks

MERS outbreak rouses investors in Taiwan, Hong Kong

HONG KONG -- Investors in South Korea and around East Asia are growing nervous about the potential for a further spread of Middle East respiratory syndrome, dumping shares of travel and consumption-related companies and buying health care stocks.

     South Korea confirmed 14 new MERS cases Thursday, raising the total to 122. Ten people have died, and over 3,800 have been quarantined.

     The outbreak is discouraging South Korean residents from going out. Department store sales sank 16.5% on the year in the first week of June, while the number of moviegoers tumbled 54.9% and amusement park guests plummeted 60.4%. In the roughly three weeks since the first case, 54,000 travelers have canceled trips to South Korea. Seeking to stem the outbreak's economic fallout, the Bank of Korea cut its key policy rate Thursday, the first reduction in three months.

     Investors have been unloading shares not only of major carriers Asiana Airlines and Korean Air, but also those of cosmetics giant AmorePacific Group on expectations of soft consumption.

     MERS apparently was on the minds of investors in Taiwan even in the early stages of the outbreak. They snapped up companies engaged in infectious-disease control May 22, the day after the first case in South Korea was confirmed. Health care products supplier Medtecs International soared more than 60% in less than two weeks, while China Airlines and travel agency Lion Travel Service faced sustained selling.

     Hong Kong investors still painfully remember the huge outbreak of severe acute respiratory syndrome in 2002 and 2003, which caused 800 deaths worldwide. MERS appears less contagious than SARS but has a higher fatality rate. Hong Kong's government raised its response level to MERS to the second highest in its three-level system Monday and advised the public to avoid unnecessary travel to South Korea.

     Tensions heightened in Hong Kong two days later. A suspicious case involving a 22-year-old woman was reported after 2 p.m., sending the benchmark Hang Seng index 1.9% lower in just 50 minutes. Hotel operator Far East Hotels and Entertainment and travel service company Travel Expert (Asia) Enterprises tumbled, while jewelry, apparel and other retail stocks lost ground as well. The woman's negative test results were reported Thursday, calming the market.

     "The suspected case led to the previous day's decline in Hong Kong stocks, but in a way it was used as an excuse to sell," said Mari Oshidari, Hong Kong-based Asian equities strategist at Japan's Okasan Securities Group. Many stocks that tumbled Wednesday were bought back Thursday.

     "Having been hit hard by SARS, Hong Kong's government is quick to respond," she said. Other market pros agreed the outbreak's impact will be limited there.

     But investors remain on alert, as it is unclear whether the outbreak will spread. In mainland China, drugmakers such as Shandong Lukang Pharmaceutical and Anhui Sunhere Pharmaceutical Excipients went limit-up Thursday.

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