May 22, 2008

Sichuan Earthquake Economic Toll at 0.5% GDP

Damage from the Sichuan earthquake is estimated at close to $10 billion (US) and shares of companies in the region effected by the quakes fell on Chinese stockmarkets and caused a broader decline in Chinese stocks. The Shanghai Composite Index is back down below 3,500 and the CSI 300 Index also plunged this week on the bad news about the impact of the massive earthquake just ten days ago.

Beijing now says over 50,000 people perished in the disaster and expect the death toll to continue to climb. Almost 5 million are reported homeless.
Over 14,000 industrial enterprises are impacted with severe destruction at some big companies such as Dongfang Electric - an important manufacturer of electric engines and motors. Downstream businesses will be faced with supply and price pressures. Asia's biggest oil refiner Sinopec is diverting product to the region and that could mean shortages and price increases in southern and coastal China.

Short term positive trend will be in rebuilding and speculators briefly drove up share prices for Chinese companies in cement, steel, and construction services.

And 184 historic and tourist sites were damaged and in some cases destroyed by the earthquake and may take years to rebuild, if at all, in a region where tourism was just beginning to be developed.

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