The Vaccine Effect
Pfizer and its German partner BioNTech recently released the efficacy results of the large-scale clinical trial of its COVID-19 vaccine candidate’ BNT162b2′. The vaccine was reported to be over 90% effective on a sample of size around 44,000. The news caused a rogue wave of global optimism regarding the revival of the economy. It increased the risk-taking appetite of people, which resulted in the soaring of stock indices. People opted out of the safe havens like treasuries, gold, and the Yen resulting in a slump, and started investing in securities correlated to economic growth. The Yen went tumbling by the most since March on Monday.
Following the announcement, the Dow Jones Industrial Average was up by 1550 points and the S&P 500 index was bolstered by more than 3.8%. Though most of the stock indices were surging, Nasdaq fell by 1.5%. Netflix, Zoom, Peloton Interactive (exercise equipment manufacturer), and PayPal Holdings are to be blamed for this slump. The lockdowns following the spread of Covid-19 greatly benefited these companies’ stocks, and the prices tumbled as people started hoping that life would get back to normal. The shares of companies like Nintendo (manufactures things like gaming consoles), Sony, and Tencent holdings also dived due to similar reasons. The vaccine news, coupled with the OPEC output deal, fuelled optimism about rebounding demand resulting in the surge of oil prices. The improved outlook for oil prices lifted CNOOC 13% and PetroChina by 4.3%. The businesses which were hit hard by the pandemic saw some growth in their stocks. Cruise stocks, for instance, Royal Caribbean was up by 25%. Among hotel stocks, Indian Hotels, Chalet Hotels, Mahindra Holidays, Advani Hotels and Resorts, and several others witnessed a surge.
In the Asian context, Japan’s Nikkie Stock average jumped over 400 points. South Korea’s Kospi and Hang Seng Index in Hong Kong also climbed. Stocks of travel-related companies, which were sluggish by now, also witnessed growth. Among Aviation stocks, Japan’s ANA Holdings closed up 18% while in Hong Kong, Cathay Pacific Airways and Singapore Airlines both climbed 13%, InterGlobe Aviation Ltd’s shares rose 4%, and Spicejet was up 3%. Among multiplex stocks, PVR climbed 7%, and Inox Leisure was up 3.77%. AMC Entertainment surged 60%. Shares in other travel-related companies also rose, including West Japan Railway and East Japan Railway, which rose 15%. Meanwhile, HSBC shares jumped 5.7% on hopes that a vaccine will allow the bank to cut bad debt provisions and boost interest income. As far as Pfizer is concerned, its stocks surged 19% intraday to hit a record high at ₹5,875 on Tuesday as investors flocked to buy the shares.
India’s access to the vaccines remains a concern. As of now, Pfizer does not have a deal with any company for distribution in India. The vaccine requires a storage temperature of -80⁰ C, which is very difficult to maintain in countries like India owing to the climate and poor infrastructure. In addition to it, Pfizer doesn’t have a deal with Covax, the covid-19 vaccine access initiative of Gavi and WHO. Cold storage companies, for instance, Snowman Logistics Ltd’s shares also jumped around 8% as the covid-19 vaccine’s super-cold storage requirements is expected to improve the business prospects.
Moderna, Russia’s Sputnik V, and University of Oxford’s Covishield also seem promising. The vaccines would not be available anytime soon, but they play a critical role in raising the spirits of the investors, which is shown by the dance of stock indices this Monday. As we anticipate the announcement of more such vaccines, it would be interesting to see the dance of the market again.
— Shivani Chauhan (editor)
