(Bloomberg) — Shares of coronavirus test kit and drug makers have been in the spotlight in Asia, posting big gains in recent days as infection numbers surge.
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Among the biggest gainers was Chinese coronavirus test kit maker Daan Gene, which rose 17% this week. In Japan, drugmaker Daiichi Sankyo rose 5.6%, its most in about a week, while South Korea's Shinpo Pharmaceutical pared gains after rising 71% in five trading days.
The companies have re-emerged as investor favorites as COVID-19 cases have surged in the three East Asian countries since last month, and rising temperatures and the Paris Summer Olympics have led to more indoor gatherings.
According to data from the Chinese Center for Disease Control and Prevention, the positivity rate for COVID-19 cases has been rising since the end of June, but symptoms from the resurgence are still mostly mild. The virus circulating in China remains an Omicron variant, including JN.1 and XDV.
South Korea's Centers for Disease Control and Prevention said it would secure additional medical supplies as a surge in infections and rising hospitalizations have caused supply shortages in some areas, and it also plans to roll out vaccines to high-risk groups in October.
Still, some analysts say the industry is unlikely to see a long-term boom like the one it saw in 2020, as local outbreaks are unlikely to develop into another global pandemic.
“There have been several COVID-19 outbreaks over the past two years, with related stocks seeing short-term gains before petering out,” said Mingyue Liu, Asia and Greater China equity investment specialist at BNP Paribas Asset Management. “Many of these companies are small and mid-sized companies with low trading liquidity.”
Liu said coronavirus-related products accounted for less than 10% of China's total healthcare sales, adding that the recent increase in demand was unlikely to provide a big boost to revenue.
Macquarie Securities' Tony Ren and Candice Gao said Chinese drugmakers making COVID-19 treatments, such as Zhongrun Sanjiu Pharmaceutical and Shijiazhuang Yiling Pharma, could benefit in the short term.
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“A sharp recovery in COVID-19 and flu infections would likely boost stock prices,” they said.
–With assistance from Dong Lyu.
(Adds details in fifth paragraph, Macquarie analyst comment in last two paragraphs.)
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