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Swine flu spurs caution amid Asian investors, sends pharma stocks soaring

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HONG KONG - Asian investors, all too familiar with economic fallout from health scares, sent airlines sharply lower and drug makers soaring Monday as a deadly flu outbreak across the Pacific stirred fears of a pandemic.

Major Japanese travel agencies, meanwhile, suspended package tours to Mexico while restaurants pulled pork from their menus.

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The actions followed the discovery of swine flu in Mexico - where the disease has sickened 1,600 people and possibly killed more than 100 - and its spread to the United States, Canada and Spain. Asia's first suspected cases were reported in New Zealand on Sunday.

For many investors, the disease drew easy parallels with the region's past struggles with infectious disease.

This time they are also mindful that a major public health emergency could derail what some believe is the beginnings of a recovery in the global economy, still reeling from its worst downturn in years.

In 2003, severe acute respiratory syndrome, or SARS, devastated Asia's tourism industry for months after surfacing in China in late 2002 and then spreading to Hong Kong. The region's airports were all but abandoned, with some carriers grounding half their fleets, before the epidemic eased more than half a year later.

Fearing a replay, investors sold down airlines, many of them already suffering massive losses from depressed international travel amid the economic crisis. Hong Kong's flagship carrier Cathay Pacific dropped eight per cent, while Australia's Qantas Airways lost four per cent.

"We are in the midst of an industry downturn and this is certainly unwelcome," said Andrew Herdman, director-general of Kuala Lumpur-based Association of Asia-Pacific Airlines, which represents one-fifth of global passenger traffic and one-third of global cargo traffic. "But this is a potential public health emergency and it will have to be a priority."

Some drug companies posted spectacular gains on expectations of surging demand. Tamiflu maker Chugai Pharmaceutical Co. Ltd. gained 14.3 per cent in Tokyo and Australia's Biota, maker of antiviral drug Relenza, vaulted nearly 82 per cent in Sydney.

In Japan, major travel agencies canceled package tours to Mexico, including Japan's largest tour agency JTB Corp., which suspended Mexico tours at least through June 30 with no cancellation charge.

Japanese restaurant chain Matsuya Foods Co. said it will temporarily suspend as a precautionary step some pork dishes that use imported Mexican pork. Many supermarket and restaurant chains were in wait-and-see mode.

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