Quake won’t hurt economy: analysts

By Song Shengxia Source:Global Times Published: 2013-4-21 23:28:01

The earthquake that hit Southwest China's Sichuan Province Saturday will not have a huge long-term impact on the stock market and the country's macro economy, and it may bring opportunities for industries such as steel and construction during the post-quake reconstruction, analysts said Sunday.

A 7.0-magnitude quake struck Lushan county near the city of Ya'an in Sichuan Saturday morning. The death toll had climbed to 186 by 17:38 Sunday, according to the Xinhua News Agency.

"The earthquake will affect market sentiment in the short term but will not trigger a crash or impact stocks in the long term," Li Daxiao, director of research with Shenzhen-based Yingda Securities, told the Global Times Sunday.

According to Li, the effect of Saturday's earthquake on the stock market will not be bigger than that of the Wenchuan Earthquake in 2008, when the stock market was going through a bearish phase, compared with the initial stages of a recovery now.

"The short-term impact on stock markets will not last for more than five days," Li said.

Analysts said the stock market would probably fall when it reopens Monday, but will soon rally, and construction-related stocks in particular will benefit from the need for post-quake construction. 

"In terms of magnitude, Saturday's earthquake is similar to the one in Yushu in Northwest China's Qinghai Province in 2010. Stock markets will fall on Monday and Tuesday, affected by transient uncertainty," Yang Xiaowei, an analyst with Lianxun Securities, told the Global Times.

Based on calculations on damage from previous earthquakes, the impact of Saturday's earthquake on the country's macro economy will be so small as to be statistically insignificant, Yang said.

China's economy grew by 7.7 percent year-on-year in the first quarter, slower than expected but still on track for a gradual recovery.

Analysts expect that the earthquake will push up the consumer price index (CPI) in Sichuan, because the province is the largest pork producer in the country and the quake will cause a decline in pork output.

This will push up pork prices and the CPI, as pork prices are an important component of the index.

"One of the possible negative effects will be increasing inflationary pressure in Sichuan. It may push up the monthly CPI in the province by between 0.4 and 0.6 percentage points. But its impact on CPI in the whole country will be insignificant," Yang said.

"The post-quake construction will benefit construction-related sectors including steel, cement and chemical materials," said Li at Yingda Securities.

Shi Yiqing, deputy director of the Department of Propaganda at SANY Group, a leading domestic heavy construction equipment manufacturer, told the Global Times Sunday that the company was the first business to enter the quake-affected region and will assess the damage to prepare for post-quake construction.


Posted in: Markets, Economy

blog comments powered by Disqus