Sunday, November 25, 2012

Is a New SARS-like Virus Spreading in the Middle East?

There's an ETF for that.
More below the jump.
From Forbes:
As with most emerging epidemics, we usually ignore them until people start dying. If the same logic applies here, it’s time to begin paying attention to the new SARS-like virus found in Saudi Arabia and Qatar. While only six cases have been identified so far, two of the patients died, suggesting that the survival rate isn’t stellar.

According to Reuters, the World Health Organization (WHO) originally  issued an international alert in late September saying a virus previously unknown in humans had infected a Qatari man who had recently been in Saudi Arabia, where another man with the same virus had died.

On Friday, November 23, the WHO said in an outbreak update that it had registered four more cases and one of the new patients had died.

“The additional cases have been identified as part of the enhanced surveillance in Saudi Arabia (3 cases, including 1 death) and Qatar (1 case),” the WHO statement said.
The new virus is a coronavirus with similar symptoms to SARS (Severe Acute Respiratory Syndrome), which emerged in China in 2002 and killed around a 10th of the 8,000 people it infected worldwide. Typical symptoms include coughing, difficulty breathing and high fever.  It spreads like other respiratory viruses, through releasing viral particles from coughing and sneezing which then find new hosts in the general vicinity....MORE
As there is no cure for SARS there is no direct approach to speculating on the disease, so there's no perfectly aligned bet.

During the 2009 Swine Flu scare we used the non-traded Tickerspy Swine Flu/Bird Flu Index (RXFLU) as a proxy. Since inception in 2008 the index slightly trails the S&P but over that time had dramatic over and under performance. I don't think the index will be as impacted should the SARS go pandemic, if for no other reason than the name.

There are dozens of Health/Pharma/Biotech ETF's that may see some action but the best trades seem to be "Short the Middle East".

The MarketVectors Gulf States ETF is very tiny at $10 mil. market cap. Less attractive would be the WisdomTree Middle East Dividend Fund although it does have a decent Egypt weighting. I don't know if Van Eck ever rolled out their Saudi offering and there are probably a few I'm missing.

More realistically the Claymore/NYSE Arca Airline ETF has past performance data, during the 2003 outbreak it fell 50%.

And there are commodity plays, with one in particular standing out should the outbreak spread to China:
 A turnip a day keeps the SARS virus away, or so many in China's capital believe. 
Turnip prices have jumped in Beijing after the vegetable was touted as a key ingredient in a potion to fight the deadly virus that causes severe acute respiratory syndrome, or SARS, peddlers said. 
Carrots, leeks, garlic and ginger have leapt in popularity, too, after the popular Star Daily tabloid published a recipe for fighting SARS last week that included those ingredients along with turnips. 
"A lot of people want turnips," said vegetable vendor Hu Benqiang, adding that he expected prices to keep rising.
Long, white turnips are already selling for three yuan per kilogram (kg) at one neighborhood market, up from 2.40 yuan (10 pence) per kg last week, said Hu. Wholesale prices have shot up more than 30 percent....
Reuters, April 2003