(Bloomberg) — Shares of makers of Covid test kits and medicines have been in the spotlight in Asia, posting sharp gains in recent days after a surge in cases.
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Among the top performers was Chinese Covid-test maker Daan Gene Co., which rose 17% this week. In Japan, pharmaceutical giant Daiichi Sankyo Co. rose as much as 5.6%, the most in about a week, while South Korea’s Shin Poong Pharmaceutical Co. pared gains after rallying 71% in five sessions.
These companies have regained investor favor as Covid cases in the three East Asian countries spiked last month. High temperatures and the Paris Summer Olympics have led to more indoor gatherings.
Positivity rates for the coronavirus have been rising since late June, although the illnesses caused by the resurgence remain generally mild, according to data from the Chinese Center for Disease Control and Prevention. The virus circulating in the country are still subvariants of omikron, including JN.1 and XDV.
Still, some analysts say the sector is unlikely to experience a prolonged boom like 2020, as such regional outbreaks are unlikely to develop into a new global pandemic.
“The prevalence of Covid has returned a few times in the past two years, and each time the related stocks experienced a short-term outperformance, but then it cooled down,” said Minyue Liu, an investment specialist for Asian and Greater China equities at BNP Paribas Asset Management. “Many of these companies are small to mid-sized companies with low trading liquidity.”
According to Liu, Covid-related products account for less than 10% of all healthcare sales in China, adding that the recent surge in demand is unlikely to provide a huge boost to profits.
–With assistance from Dong Lyu.
(Adds increase in positivity rate in 4th paragraph.)
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