Various regions in Asia have been hit by a series of extreme weather events from heat waves to flooding. According to a Bloomberg report, this has badly affected stock market investors ahead of El Nino-related risks and climate change impacts. Extreme weather events have always affected stock markets, but as it is happening more frequently now, Asia is undoubtedly the location where the influence on stock markets has been the greatest so far this year, the report said adding that volatility associated with extreme weather is not limited to Asia alone.
Citing researchers and analysts who monitor the effects of these events, the report said that traders having trouble with market swings should get used to them.
Jigar Shah, head of research at Mumbai-based Kim Eng Securities Pvt told Bloomberg that it becomes complex to predict the demand and output trends and take sector or stock calls because the weather is uncertain. The agriculture and food chain is at significant risk if this goes uncontrolled.
According to the report, India, the world’s largest producer of milk, has experienced an unusual decline in dairy products due to the warmest February in more than a century and an increase in cattle fatalities brought on by a viral skin illness. Shares of dairy companies like Parag Milk Foods Ltd. and Heritage Foods Ltd. are increasing in value as a result of forecasted increases in heat waves and peak summer demand.
The Bloomberg Intelligence analysis suggests that Indian stocks with more exposure to rural areas may be harder hit by expectations of an El Nino than urban-oriented shares.
Unpredictable weather has also caused more sudden swings in supply and demand patterns, especially when combined with geopolitical events like Russia’s conflict in Ukraine.
In Australia, Newcrest Mining Ltd.’s Telfer gold mine was closed this month. After a cyclone hit the Western Australian coast, the company’s shares fell from more than a two-year high. It was followed by heavy rain and flooding that hampered coal production for miners such as Whitehaven Ltd. and BHP Group late last year, the report noted.
However, Hebe Chen an IG Markets analyst based in Melbourne told Bloomberg that some sectors and markets will benefit as they help fill the gap when extreme weather or natural disasters undercut supply in another region.
“Extreme weather events, regardless of their types and sizes, unstoppably ripple through the financial markets in both predictable and unpredictable ways. It is not uncommon that these ripples could turn into a tidal wave,” she said.