Tuesday 28 December 2004

Earthquake and tsunami in the Indian Ocean

2004 has been a year of natural disasters. After just getting through a period of hurricanes a few months back, an earthquake off Indonesia and the tsunami that it triggered has killed thousands of people and made many more homeless around the Indian Ocean.

Economists are not expecting widespread impact on Asian economies from the disaster. Travel-related industries like the airlines and tourism will be affected, but the impact is likely to be limited to those serving the areas hit by the disaster. Sri Lanka, especially its tourism industry, is likely to get hurt, as is Thailand, although probably to a much smaller extent. Oil production in the Indonesian province of Aceh in northern Sumatra, near the earthquake's epicentre, does not seem to have been affected.

Some stocks closed lower yesterday in reaction to the disaster. Predictably, these included Thai Airways, down 3.5 percent, Airports of Thailand, down 2 percent, Singapore Airlines, down 0.9 percent, and Star Cruises, down 2 percent.

In Europe, Club Med, which has resorts in Thailand and the Maldives, slipped 1.4 percent, while travel operator TUI AG dropped 1.1 percent. Insurers were also affected, with Munich Re falling 1.5 percent and Swiss Reinsurance Co. falling 1.8 percent.

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