Singapore Travel & Hospitality - What if MERS hits Singapore?

■ Limited impact from MERS in South Korea thus far, with SIA being marginally affected

■ If MERS appears in Singapore, expect travel & hospitality stocks to be first hit

■ A SARS-like situation would see wider impact on retail, F&B and even land transport stocks

■ Though the risk of MERS turning into a SARS-like situation is very low, safe haven stocks would include healthcare and related stocks

Limited impact from MERS in Singapore so far
So far, there has been limited impact on Singapore stocks with the exception of SIA, which has seen some price weakness in recent weeks, as not many other Singaporean companies have direct exposure to South Korea. Unless the situation escalates to a SARS scenario, we do not expect any serious implication on SGX listed stocks. Given that the MERS situation in South Korea seems well contained at the moment, we have not put in any ‘MERS discount’ for Singapore listed stocks.

Potential of MERS appearing in Singapore is possible...
As long as people are travelling in and out of Singapore, there is always the risk that MERS could appear in the country. Should that happen, we expect travel & hospitality stocks such as the airlines SIA and Tigerair, hospitality trusts and gaming stocks such as Genting Singapore to be first hit.

... but a SARS-like scenario is very unlikely in our opinion
Even if MERS does show up in Singapore, a SARS-like scenario in which the consumer and land transport companies and even the whole economy was hit, is very unlikely given that the authorities are well prepared to deal with it, given the lessons learnt previously.

Safe haven stocks: Healthcare and Telcos
Drawing from 2003, stocks that performed well include healthcare and healthcare related stocks, whilst telco stocks proved to be resilient. Notably, the badly affected stocks in travel and hospitality and consumer did rebound post-SARS once the situation was under control. (Read Report)

Source : DBS Group Research

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