Vaccine and Diagnostic Kit Stocks Hit Upper Limit Despite Global Market Crash

Among the 7 stocks hitting the upper limit on the 17th, 5 are companies developing COVID-19 treatments and diagnostic kits

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] While global stock markets are showing a downward trend, the stock prices of companies manufacturing diagnostic kits and vaccines for the novel coronavirus infection (COVID-19) are on the rise.

According to the Korea Exchange on the 18th, a total of seven stocks?Antrogen, Hanph, Theragen Etex, LabGenomics, Enzychem Lifesciences, PCL, and Korea Technology?hit the upper price limit the previous day. Among them, five companies, excluding Korea Technology and Hanph, are manufacturers of COVID-19 diagnostic kits and vaccines. All closed the session up more than 29%. COVID-19 diagnostic kit manufacturers PCL and LabGenomics rose sharply for two consecutive days, following an 18-20% increase the previous day. This contrasts with the KOSPI index falling to the 1600 level amid the global stock market downturn.

The news of visible exports of COVID-19 diagnostic kits appears to have acted as a particularly positive factor. According to the Ministry of Food and Drug Safety, seven companies?Kogen Biotech, Seegene, Solgent, PCL, SD Biosensor, LabGenomics, and Cansorop?received export approval for eight items of COVID-19 real-time gene test (PCR) reagents they developed.

News of COVID-19 treatment development was also effective. Enzychem Lifesciences is a representative example. The company’s new drug substance under development, 'EC-18,' is known to be effective in treating COVID-19, attracting buying interest. On the 16th, Enzychem Lifesciences applied to participate in the Medical Countermeasure (MCM) program of the Biomedical Advanced Research and Development Authority (BARDA) under the U.S. Department of Health and Human Services to verify the use of 'EC-18' as a COVID-19 treatment. Patent acquisition is also being considered in major regions such as Japan, Europe, and China. Theragen Etex also hit the upper price limit following news of successful discovery of a COVID-19 treatment candidate substance.

Meanwhile, as the fear of COVID-19 spreads to the U.S. and Europe causing stock markets to plummet, governments and central banks worldwide are pouring out monetary and fiscal policies. The U.S. Federal Reserve (Fed) announced an additional supply of $500 billion (approximately 615 trillion KRW) in repurchase agreements (repos), and the Democratic Party proposed a $750 billion stimulus package. Efforts such as the International Monetary Fund (IMF) mentioning mobilization of a $1 trillion loan and German Chancellor Angela Merkel’s call for liquidity supply continued, but failed to stabilize the fear-driven market.

Ultimately, there is an opinion that the fundamental solution lies in the development of COVID-19 treatments. The buying spree in stocks related to COVID-19 diagnostic kits and treatments is in the same context. Kim Yugyeom, head of the research center at Cape Investment & Securities, said, "Even if policy responses are made, it will be difficult if COVID-19 is not resolved," adding, "Since policies cannot continue indefinitely, fundamental resolution of COVID-19 through patient number suppression and treatment development must begin for the fear to dissipate."