COVID-19 Vaccine News Sends ASX Banks Soaring Higher

  • November 10, 2020 01:32 PM AEDT
  • Team Kalkine
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COVID-19 Vaccine News Sends ASX Banks Soaring Higher

Summary

  • Vaccine news has sent markets soaring higher on Tuesday
  • Overnight, in the US, Pfizer reported a 90% efficacy for its vaccine candidate.

With Pfizer and BioNTech claiming that their coronavirus vaccine candidate has an efficacy rate of more than 90%, stock markets have priced in definite revival in the economy. 

This revelation could be one of the best news of 2020, but maybe the best is yet to arrive. 

As Pfizer and BioNTech unveiled encouraging results, the race is now on for other vaccine candidates that have been working on the virus. 

The 90% efficacy factor has been a differentiating factor compared to other vaccine programs. The vaccine candidates by AstraZeneca and Moderna are also in the advanced stages of trials. 

Stock markets in the US and Europe inched higher on Monday as the markets digested the news of the extraordinary efficacy levels of the potential vaccine candidate. 

Image Source: © Kalkine Group 2020

Image Source: © Kalkine Group 2020

This development has certainly forced the investors to cover shorts in equities. Shorting equities at a time when vaccine results are impending would not be a wise act. 

As a result of short covering, the bounce in markets could be explained to some extent. The arrival of a vaccine in the equation also fundamentally changes the economic forecast for the next two years, and the recovery could be much faster with an effective vaccine.

Developing the vaccine is, probably, the first step. Now the policymakers and the vaccine developers need to emphasise on the delivery of the vaccine candidate. 

There is a need for capacity development for vaccine manufacturing across major parts of the world. It would allow a smooth deployment of vaccines on the ground, better logistics capability, and storage infrastructure. 

Shares of Australian Banks Jump

Banks perform consistently with the performance of an economy. With an effective vaccine candidate in the fray, the speculations around the economic revival have soared. 

If vaccines are made available over the near term, the economic recovery could be much faster than what is anticipated now. The current economic forecasts by agencies have not considered the potential of a vaccine.

With a vaccine candidate, the chances of adverse outcomes because of rising infections would be minimal and widespread lockdowns would not remain inevitable.

International travel could also witness a revival. Activities that require close contacts, like travelling, leisure and gaming, could also receive a fresh breath of life and start to resurge. 

Good Read: RBA says Australia might already be out of recession

After reporting full-year results, the majority of large banks have announced dividends at the time of results release. 

The news about the vaccine has shot up the share prices of banks. This magnitude of the rise in the stock prices of banks is certainly the highest since the pandemic broke markets in February this year. 

NAB traded at $ 21.210 on 10 November 2020 (AEST 12:41 PM), up by 7.338% from the previous close. 

CBA traded at $ 72.740 on 10 November 2020 (AEST 12:41 PM), up by 3.456% from the previous close. 

WBC traded at $ 18.670 on 10 November 2020 (AEST 12:41 PM), up by 5.123% from the previous close. 

ANZ traded at $ 20.325 on 10 November 2020 (AEST 12:41 PM), up by 5.749% from the previous close. 

 

 


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