A Covid-19 mass vaccination center on Rabin Square in Tel Aviv, Israel.
Photographer: Kobi Wolf / Bloomberg
Photographer: Kobi Wolf / Bloomberg
The race to deliver the jab to the world’s populations has so far been led by a handful of smaller nations, and they are now overtaking some of the wealthiest countries in the eyes of traders as well.
The fastest Covid-19 vaccine launches worldwide, in Israel and the United Arab Emirates, are boosting their stocks to some of the biggest gains in the world. Israel’s benchmark index advanced 7.6% this year, outpacing the S&P 500 and Euro Stoxx Index. It ranks 12th among the main equity indicators. Meanwhile, Dubai’s General Financial Market Index rose 9%, practically reversing its 10% drop in 2020 and giving investors the sixth best return of the year so far. The Abu Dhabi Stock Exchange General Index is the third best performing in the world.
Traders are racing to set the price for the global launch of the vaccine and bet that nations at the forefront will be the fastest to recover from the crisis, raising their stocks, currencies and bond yields. The portion of a country’s population that has been inoculated may be “the most important statistic to be tracked next year,” according to strategists at JPMorgan Chase & Co.
Israel and the United Arab Emirates administered more doses per 100 people than any other nation.
More than 63 million shots fired: Covid-19 Vaccine Tracker
So far, Israel has vaccinated about 30% of its population and the United Arab Emirates about 20%. If sustained, they can reach the herd’s immunity limit in the middle of the year, says JPMorgan.
“Will there be enough divergence regarding herd immunity between countries to make this issue marketable between markets? Probably, ”wrote strategists led by John Normand in a January 8 note. “Countries that return to pre-crisis activity levels more quickly due to some combination of stimulus and vaccine distribution must witness the upward pressure on their interest rates and currencies.”
While Israel and Dubai are tempting examples, the case for growth fueled by vaccinations in larger economies is unclear, according to Michael Herzum, who directs macro strategies at Union Investment in Frankfurt.
“It is difficult to isolate these effects from other market drivers and therefore makes it difficult to play them at the country-by-country level,” said Herzum. Even so, he is incorporating vaccination fees into his cross-asset allocation decisions.
In Britain, where the first citizen out of a test received a coronavirus vaccination on December 8, the FTSE 100 benchmark surpassed its peers in Europe, despite its population suffering from a third national blockade to stem the resurgence of the virus and a new variant spreading fast. Vaccines can pave the way for the economy to recover and further increase the country’s stocks, according to Herzum.
“The UK’s stock may be in a good position very soon, as the UK is likely to achieve herd immunity much faster than the continent due to much better progress in vaccinations,” he said. “This could result in a big fluctuation in economic activity, once the Covid-19-related restrictions are lifted.”
– With the help of Farah Elbahrawy
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