According to a report from Deutsche Bank, London Real estate companies like Brixton and Slough Estates may be attractive to investors seeking to minimize losses that might result from a feared outbreak of avian influenza in Europe.
Deutsche Bank strategists wrote in the report, dated Friday, long-haul carriers including Air France-KLM, Lufthansa and British Airways could be among the worst- hit shares in an outbreak if governments imposed travel restrictions.
It is the largest and "most severe" outbreak of avian flu on record, having killed 91 people so far - mainly in Asia - amid fears of a pandemic, according to Deutsche Bank. The H5N1 virus that was first detected in Southeast Asia in 2003 has recently been found in 28 countries, including seven in the European Union.
The strategists wrote, "Real estate stocks would outperform the broader market in such an environment, as investors flock to safety, quality and yield," and added "A global restriction on travel could severely impact the operating environment for the majority of airlines."
The World Bank has estimated that a pandemic among humans could cost the global economy $800 billion annually, which is 2 percent of global output, Deutsche Bank said. Deutsche Bank estimated that a "moderate" to "severe" human outbreak, with 14 million to 70 million deaths, would cut Europe's gross domestic product by 2 percent to 4 percent.
Slough Estates, owner of five of the largest industrial parks in Britain, is also likely to outperform. Shares of Brixton, Britain's biggest industrial landlord, are likely to outperform in a pandemic because it has nonretail property and is located in a country with lower exposure to risk.
Along with the airlines, other stocks likely to be hurt by a pandemic include luxury goods, basic resources, oil and natural gas, banks, diversified financials, life insurers and reinsurers and capital goods. Other stocks likely to gain during an outbreak include health care, telecommunications, utilities, online food retailers and tobacco companies.