Asian Pharmas Rally on Flu Worries, Airlines Sink

Asian stocks weakened Monday with worries about a global flu pandemic unnerving financial markets boosting pharmaceuticals while beating down pork product makers, trade, travel and tourism stocks.

Fears of a global swine flu pandemic grewwith reports of new infections in the United States and Canada on Sunday. Millions of Mexicans stayed indoors to avoid a virus that has reportedly killed over 100 people. Investors in Asia are all the more aware of the potential damage after the outbreak of SARS in Hong Kong six years ago hobbled the city and regional economy.

Pharmaceutical shares rallied around the region on bets demand for anti-viral drugs could rise. Australia's Biota, maker of the Relenza flu vaccine, surged to close 81 percent higher. But airlines took a sharp hit as swine flu fears are expected to sink air travel demand. Singapore Airlines was down 4.7 percent, Cathay Pacific down 8.4 percent and Korea Air Lines was down 7.3 percent.

The Australian dollar -- the highest yielding of big currencies whose fortunes are tied closely to swings in stocks -- dropped sharply against the greenback. The U.S. dollar slipped against the yen but strengthened against the euro while oil prices slipped to below $51 a barrel.

Japan's Nikkei 225 Average closed up just 0.2 percent, giving up gains seen earlier in the day as the yen rose sharply and other Asian stocks fell on concerns about swine flu in Mexico. Chugai Pharmaceutical rallied 14 percent on expectations of a
pick-up in flu drug sales while Shinsei Bank and Aozora Bank also bucked the trend, zooming higher as sources said they were in merger talks.

South Korea's KOSPI ended 1 percent lower after volatile trade, with losses by banks and technology issues including Samsung Electronics outweighing gains by some automakers.

Australian shares rose 0.5 percent, buoyed by a $2.5 billion takeover of brewer Lion Nathan, but gains were well capped on concerns about the spread of swine flu and its potential effect on world growth. The Australian government moved to strengthen border controls as a precaution against the flu, which has killed more than 100 people in Mexico, while travel-related stocks tumbled. Qantas shed 4 percent.

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Hong Kong shares shed 2.7 percent with Chinese banks beaten down by worries of strategic investor exits in the near term, while concern over a potential swine flu outbreak sent airline stocks tumbling. ICBC fell 5.9 percent on expectations of a sell-down when a large portion of shares emerge from a lock-in period on Tuesday. China's flagcarriers Air China and China Southern Airlines both slid.

Singapore's Straits Times Index fell 1.9 percent. Shares of SIA, the world's second largest carrier by market capitalization, fell 4.5 percent on concerns the spread of swine flu would further reduce air travel.

China's Shanghai Composite Index slipped 1.8 percent, hurt by worries about a possible global swine flu pandemic, with food makers hit hard although pharmaceutical stocks soared. Hunan New Wellfull, a pork producer, sank while Fortune Ng Fung Food, a beef product vendor, also sagged.