GLOBAL - The spread of the SARS virus could have a "devastating" impact on pension schemes' portfolios - especially those with investments in Asia - fund managers warn.
State Street Global Advisors said while SARS – Severe Acute Respiratory Syndrome – had already hit Asian economies, the impact on China, and its place in the supply chain, could “severely” affect the global economy.
SSgA said most Chinese manufacturers operated in open-plan shop floors and any outbreak could shut down whole factories and halt production.
SARS has so far claimed more than 300 lives worldwide, principally in China’s Guangdong province, Hong Kong, Singapore, Taiwan and Canada. But that figure is likely to be far higher, due to the Chinese government’s failure to curb the spread of the virus and downplaying its impact.
SSgA global active equity portfolio manager Brad Aham warned: “The ultimate impact on schemes’ portfolios will depend on SARS’s severity and duration. In the last couple of weeks, the aviation and tourism sectors, together with the food and entertainment industries, have been particularly hard hit.
“Combined with the slowdown in activity due to the Iraq conflict, SARS is looking to have a devastating impact on many companies for the second quarter of 2003.”
And Aberdeen Asset Management Asia managing director Hugh Young predicted that the virus could shave 0.5% of Asia’s GDP growth for the year.
“From the investment perspective, it is clear that firms will have to adjust their earnings’ expectations, although in truth it is difficult to isolate a specific SARS effect.
“Putting a number on this is largely a matter of speculation at this point because the potential for SARS to gain ground is not yet known.
“Should fear of infection remain widespread for more than another few weeks, with all its consequences for disruption, those growth estimates may have to be revised.”
But Barclays Global Investors chief economist Haydn Davies disagreed.
He said: “The markets are not too worried about SARS.
“Obviously it has got the potential to mushroom, but at the moment it is seen as a localised problem and in the global scheme of things, it is still a ‘minor’ problem.”
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