Targeting the coronavirus vaccine: These companies can be market winners and losers

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Moderna announced last week that its coronavirus vaccine is 95 percent effective in preventing coronavirus infection, based on Phase 3 data. This news came just a week after Pfizer-BioNtech announced the effectiveness of their own coronavirus vaccine. Today, AsrtraZeneca announced that its vaccine is at least 70 percent effective, and more announcements are likely to come this year or early next year.

For markets, these announcements could provide support as the spread of the coronavirus epidemic reaches new and new peaks in both Europe and the United States. It will take a while for the vaccines to be readily available, but analysts say the pre-epidemic return is expected to return in the spring.

Potential winners

Looking at the events of recent weeks, the aviation / tourism industry appears to have benefited the most from the positive vaccine news. On November 16, prices of both European and American airlines exploded, with United Airlines at 8.6 percent and American Airlines and Delta at nearly 6 percent.

The largest acquirer is also owned by British Airways International Airlines Group who raced 12.2 percent – and are up another 40 percent since.

The airline lost nearly 73 percent of its value this year, despite a massive increase.

Analysts expect that in the developed world, the retail and real estate markets will benefit most from the end of the epidemic, followed by the office and catering sectors.

Experts see the vaccine news as encouraging, although “there are still challenges for airlines,” said flight analyst Brendan Sobie:

The long-term outlook for business travel remains uncertain… There are estimates that demand could decline by 5-20 percent even in the longer term, as companies see business travel as less necessary.

The other industry mentioned above that could be a winner is the real estate and commercial real estate industry. The industry has been hit hard by the coronavirus epidemic and the spread of the ‘home office’. In parallel with the vaccine news, there is a possibility that people will return to the office.

The iShares Global REIT ETF, which makes up real estate stocks worldwide, rose nearly 9 percent the day the Pfizer vaccine was announced, and rose just 13 percent in November.

Focusing on office and retail properties in Manhattan Empire State Realty Trust shares of a real estate mutual fund up 37 percent this month as a result of vaccine news, while one of New York’s largest commercial landlords, SL GreenThe shares rose to almost 37 percent.

A similar process can be observed elsewhere, with the UK’s 2 largest office rental companies, Land collateral and the British country its stock price in November far outstripped the broader market.

Despite the steep rise, the REIT sector is still not approaching exchange rates at the beginning of the year, it is clear that the exchange rates of retail real estate companies and office companies are well below pre-epidemic exchange rates.

Simon Property Group’s stock price fell nearly 45 percent this year, despite vaccine news.

The Empire State Realty Trust has skyrocketed as a result of the vaccine news, but is down 38 percent so far this year.

Judging from the initial exchange rate response from listed real estate firms, “investors expect retailers in Europe and the US to benefit most from the vaccination, followed closely by the office and hospitality sectors,” Fong said in an email interview.

According to the expert, the gradual return to normal conditions creates an opportunity for “different actors, be it tenants or landlords, to implement their previously suspended plans and developments to support the recovery of the real estate market”.

Ultimately, it therefore seems more likely that we will see the start of a longer-term upward trend in cyclical sectors, which vaccine news and vaccination programs can act as an ongoing catalyst.

Potential losers

Huge emerging tech companies that have benefited from the ‘home office’ proliferation are underperforming the wider market since the news of the vaccine. The decline is not yet significant, in fact, there have been signs of recovery / correction in the industry over the past week.

The Amazon, whose online shopping services were essential to millions in the epidemic, fell 5.1 percent as a result of the first vaccine news. European online supermarket Ocado, listed on the London Stock Exchange, also recorded a similar decline of 5.2 percent.

Amazon’s inventory continued to decline after a double peak due to vaccine news, but is currently bypassing. The company’s stock price rose nearly 68 percent this year.

The Alibaba and the stocks are past an equally fluttery November, though Chinese technology stocks have been hit by several negative impacts in addition to vaccine news. The Chinese government unexpectedly intervened in Ant Financial’s planned equity offering, while Trump banned more Chinese companies.

Alibaba fell big after the failed IPO and vaccine news, but still rose nearly 30 percent this year.

Other “stay at home” stocks are also declining, one Zoom Pfizer shares were 17.4 percent lower on the news of the Pfizer vaccination that day as the market began to price that those who had previously worked from home would return to the office.

Even those who have owned the stock since the start of the year have no reason to complain: the company’s stock price is up nearly 545 percent.

The gushing giant, the Netflix its shares also fell sharply, by 8.6 percent after the announcement of the vaccine news. Shares of the company are up 51 percent this year despite a drop.

Of course, this does not mean that these companies no longer have a chance, but due to tight prices, a correction came at the right time anyway.

Ahead of Pfizer news, Zoom was up 635 percent this year, but Amazon was up 79.2 percent as well, while Netflix was up 59.1 percent.

Many analysts believe that positive vaccine news can lead to longer-term sales pressure in the tech company market.

Is this the start of a big cycle? Probably… Maybe we have finally found the catalyst to move capital to cyclical stocks instead of ‘stay-at-home’ stocks.

– wrote in her blog post Johanna Kyrklund, Investment Manager at Schroders Asset Management.

In the longer term, cyclical sectors can certainly benefit from the launch of vaccination programs, but technological development will at best stop, stock prices may drift / fall for a while.

The S&P 500 closed at 3,557 points on Friday, up nearly 10 percent this year despite the coronavirus epidemic.

Cover Photo: Drew Angerer / Getty Images


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