MARKETS SPOOKED BY OUTBREAK OF SWINE FLU - The markets are reacting badly to the outbreak of swine flu. Hong Kong's main exchange is trading almost 2.8% lower this morning as investors sell off airline and transport stocks over fears about travel restrictions in the event of a pandemic. Hong Kong's Cathay Pacific Airways was 8% lower, while shares in Japan Airlines ended the day down 4.5%. Meanwhile, pharma companies Roche Holdings and GlaxoSmithKline have said they can supply millions of doses of flu medicines. Roche says it has a stockpile of three million packages of its Tamiflu drug ready for use by the World Health Organisation. Both Roche and Glaxo, which makes Relenza, have made massive amounts of money in recent years for stockpiles of their drugs following earlier scares over bird flu. There has also been a currency impact with the Mexican peso falling 2% against the dollar, which in turn fell against the Japanese yen.
Pramit Ghose, managing partner at Bloxham Stockbrokers, says the outbreak of swine flu in Mexico will have a 'very short term negative' impact on world stock markets. He says that after recent runs of 30% in the US stock markets, any sort of negative news is sign as a sign for profit-taking. This is evident already this morning as the Asian markets tumble and he predicts that European markets will see falls of between 1-2% today However, in the longer term, Mr Ghose says that the flu outbreak will no longer be an issue. He predicts it will be 'a two day wonder' for stock markets, although obviously a much more serious issue for those people actually infected with the disease.
In response to coverage over the weekend given to comments from Independent News and Media shareholder Denis O'Brien that the prospect of INM's ability to refinance €200m of debt by a May 19th deadline were 50:50, Mr Ghose says that the issue is a very serious one. He says it will be very difficult to achieve the re-financing. He believes that INM will get the refinancing in some way, but that the refinanciers will extract a very severe penalty either in terms of very high interest rates or a debt for equity swap, which would give them a very large stake in the firm. He also says that Mr O'Brien and Tony O'Reilly would be expected to put some of their own money in.
There was also much speculation over the weekend about pressure on the AIB chief executive Eugene Sheehy to step down ahead of the bank's annual general meeting on May 13. Mr Ghose says that while he is not privy to what is going on at the bank, he recalls that Mr Sheehy went over to the US for AIB to sort out its problems after the John Rusnak affair. He says he did a very good job there and adds that he is surprised that there would be a move to remove him from the top job at the bank.
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MORNING BRIEFS - Trade credit insurance insures suppliers of goods and services against the risk of their customers defaulting on their invoice payments. The food and drink industry's main lobby group has said the Government needs to introduce a state backed scheme, similar to one promised in the UK budget last week, because of difficulties getting sufficient cover from insurance companies because of the recession. Food and Drink Industry Ireland says delaying such a scheme here will cause unnecessary job losses and further damage to the ability of Irish companies to compete.
***** The Minister for Enterprise, Trade and Employment Mary Coughlan is in Saudi Arabia and Quatar this week. She is leading an Enterprise Ireland trade mission of mainly construction companies seeking contracts in the region. According to her office, exports to Saudi Arabia were worth €400m last year.
*** On the currency markets, the euro is worth $1.3145 and 90.4 pence sterling.
