# Effects of floods on market?



## tothemax6 (12 January 2011)

Hi All,
Does anyone have insight in what the likely effects of the flooding will be on the stock market? Or has anyone been in a previous flood event and seen its effects on the market?
My hunch is that it will only cause a minor 'blip' in the market, since the flood is not likely to be sustained for any length of time, and following this the market will resume an upward course. Does this sound reasonable? I did look back at a previous flood event (Feb 2008 I think it was), and did not see any significant effects on the market - although this was during a boom, so it could be different.
Cheers!


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## vincent191 (12 January 2011)

The market overall maybe a small down trend. Certain sectors will be effected more. Insurance companies, Qld coal producers, listed primary and agriculture companies, sugar, cotton and explration companies will all be effected. ESPECIALLY insurance. Short QBE.


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## doctorj (12 January 2011)

vincent191 said:


> The market overall maybe a small down trend. Certain sectors will be effected more. Insurance companies, Qld coal producers, listed primary and agriculture companies, sugar, cotton and explration companies will all be effected. ESPECIALLY insurance. Short QBE.



Insurance will be effected in the short term, but the estimates I've seen from folk here in London is that it's actually a relative non-event from an insurance perspective. As of Monday, loss estimates were only $150mm from about 4,300 claims (much of which will be picked up by reinsurers offshore, rather than the Aussie primary insurers). Compare this to the Perth hail storm that was north of $1bn! Unfortunately, it seems very few folks have flood cover. The next few days will be almost as crucial for the industry as the poor souls in the way of the flood - losses may rise rapidly as more populated areas flood. 

In short, if it were me, I'd wait until the market cap of QBE et al take a hit and then jump on board as the actual is likely to be a lot better than feared from an insurance perspective.


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## doctorj (12 January 2011)

doctorj said:


> As of Monday, loss estimates were only $150mm from about 4,300 claims



Have just seen some updated numbers through for those interested, Suncorp and IAG have received 3,400 claims between them, so loss estimates probably up quite a bit from Monday given there are other insurers in the market.  Fitch put out a note this morning saying that IAG should be reinsured for losses above $15mm and Suncorp is covered up to about $5.6bn of claims.


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## GumbyLearner (12 January 2011)

tothemax6 said:


> Hi All,
> Does anyone have insight in what the likely effects of the flooding will be on the stock market? Or has anyone been in a previous flood event and seen its effects on the market?
> My hunch is that it will only cause a minor 'blip' in the market, since the flood is not likely to be sustained for any length of time, and following this the market will resume an upward course. Does this sound reasonable? I did look back at a previous flood event (Feb 2008 I think it was), and did not see any significant effects on the market - although this was during a boom, so it could be different.
> Cheers!




this may help tothemax

by Michael Smith
courtesy of Reuters  

UPDATE 1-FACTBOX-Companies & industries hit by Australian floods
2011-01-12 05:21:58 GMT (Reuters)

http://www.futurespros.com/news/fut...ies-affected-by-australia's-floods-1000006220


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## So_Cynical (12 January 2011)

doctorj said:


> Insurance will be effected in the short term, but the estimates I've seen from folk here in London is that it's actually a relative non-event from an insurance perspective.
> 
> In short, if it were me, I'd wait until the market cap of QBE et al take a hit and then jump on board as the actual is likely to be a lot better than feared from an insurance perspective.




I jumped into Suncorp very late yesterday figuring the panic sellers etc had already bailed...the SP held up today ok.


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## Julia (12 January 2011)

I'd say that any temporary dip will be more than offset by the later impetus to the economy as the rebuilding starts to happen.  This will push up employment and generally lend a sense of optimism to markets imo.


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## prawn_86 (13 January 2011)

Does anyone know of any listed shopfitters or something in that sort of industry? As they will have a lot of work coming up. I did a search but couldn't find anything


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## glenn_r (13 January 2011)

doctorj said:


> Insurance will be effected in the short term, but the estimates I've seen from folk here in London is that it's actually a relative non-event from an insurance perspective. As of Monday, loss estimates were only $150mm from about 4,300 claims (much of which will be picked up by reinsurers offshore, rather than the Aussie primary insurers). Compare this to the Perth hail storm that was north of $1bn! Unfortunately, it seems very few folks have flood cover. The next few days will be almost as crucial for the industry as the poor souls in the way of the flood - losses may rise rapidly as more populated areas flood.
> 
> In short, if it were me, I'd wait until the market cap of QBE et al take a hit and then jump on board as the actual is likely to be a lot better than feared from an insurance perspective.




I see Suncorp offer automatic flood cover with their house insurance.

http://www.suncorpflood.com.au/

But due to the reinsurance their cost of claims is not pegged to the actual claims cost, a bit like a bookie at the races laying off bets.


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## Vicki (13 January 2011)

> Does anyone know of any listed shopfitters or something in that sort of industry? As they will have a lot of work coming up. I did a search but couldn't find anything




On that point, I thought of 'Fleetwood'...Not sure of their ticker code?

I think they build caravans & temporary homes for the mining industry?

They might find their services in great demand, in coming months.

Vicki


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## prawn_86 (13 January 2011)

Vicki said:


> On that point, I thought of 'Fleetwood'...Not sure of their ticker code?




I cant invest in Fleetwood for personal reasons/conflicts (cant state why) but yes its probably not a bad idea


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## burglar (13 January 2011)

Just to hand: ASX Report from QRN regarding weather impact on rail services.


http://www.asx.com.au/asxpdf/20110113/pdf/41w55cm8csfqjs.pdf


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## Julia (13 January 2011)

prawn_86 said:


> Does anyone know of any listed shopfitters or something in that sort of industry? As they will have a lot of work coming up. I did a search but couldn't find anything



Friends of mine have a shopfitting business.  They are always flat out anyway.



glenn_r said:


> I see Suncorp offer automatic flood cover with their house insurance.
> 
> http://www.suncorpflood.com.au/
> 
> But due to the reinsurance their cost of claims is not pegged to the actual claims cost, a bit like a bookie at the races laying off bets.



Interesting link.  I see it states they are not writing any new business in Qld at present.  Perhaps they are rethinking their policy of offering automatic flood insurance!


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## prawn_86 (13 January 2011)

Julia said:


> Friends of mine have a shopfitting business.  They are always flat out anyway.




Do you know if they import their products? If so if you want to pass on their details i can help them out with that side of things


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## burglar (13 January 2011)

AIO - Asciano, owners on Pacific National rail, has been well hammered !


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## TheAbyss (13 January 2011)

Dont know the levels of impact however JB Hi Fi have closed 12 of their 32 Qld stores due to flooding. What of Coles and Woolies?

Centro Properties may well be in some trouble as i know a few of their Qld malls are under water. Westfield will also have some under water. This could go on and on as some wont open for months so their has to be an impact on revenues for some of these. Insurance? Unlikely as most are classed as Riverine flooding which isnt covered.


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## Tysonboss1 (13 January 2011)

The net effect should be next to nothing,

Once the water is gone the government assistance along with insurance pay outs will be like a stimulas package in those areas.


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## tothemax6 (13 January 2011)

TheAbyss said:


> Dont know the levels of impact however JB Hi Fi have closed 12 of their 32 Qld stores due to flooding. What of Coles and Woolies?
> Centro Properties may well be in some trouble as i know a few of their Qld malls are under water. Westfield will also have some under water. This could go on and on as some wont open for months so their has to be an impact on revenues for some of these. Insurance? Unlikely as most are classed as Riverine flooding which isnt covered.



And yet, today the market jumped, and JB went to $19 . The market just seems to do its own thing .


Tysonboss1 said:


> The net effect should be next to nothing,
> Once the water is gone the government assistance along with insurance pay outs will be like a stimulas package in those areas.



But insurance only covers the lost equipment, it doesn't cover the downtime...


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## Tysonboss1 (13 January 2011)

Companies on the sharemarket trade at levels equal to many years of earnings, a short term what impact will this have on jbhi ten year earnings , nothing. 

So it's correct that this flood should have no pricing impact, except for the insurance companies that arenot well capitalized. 

If the market did soften from this flood it should be considered an over reaction. In fact a disaster of this nature should be factored in for every 5 years. Because disasters are sure to happen all over the country from time to time


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## Gringotts Bank (13 January 2011)

On tv just then: $5 billion in damages + $13 billion in repair work = $18 billion estimate.

I guess it comes to the taxpayer to provide the funds, similar to the Vic bush fires.

Would have been better if the insurance co.'s footed the bill, eh?

They were saying the Qld coal companies will be severely affected.


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## Tysonboss1 (13 January 2011)

Gringotts Bank said:


> On tv just then: $5 billion in damages + $13 billion in repair work = $18 billion estimate.
> 
> I guess it comes to the taxpayer to provide the funds, similar to the Vic bush fires.
> 
> ...




So 18 billion is going to be injected into qld economy over the next few months, that should be good for business.


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## Julia (13 January 2011)

prawn_86 said:


> Do you know if they import their products? If so if you want to pass on their details i can help them out with that side of things



I have no idea about what they do or don't import, prawn.

Not sure what you mean by your being able to 'help them out with that side of things'.


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## GumbyLearner (14 January 2011)

Food Supply Has Just Been Materially Reduced: Gartman

http://www.cnbc.com/id/41046196?__source=yahoo|headline|quote|text|&par=yahoo


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## prawn_86 (14 January 2011)

Julia said:


> Not sure what you mean by your being able to 'help them out with that side of things'.




I work as a currency broker and we deal with businesses who import in order to save them time and money on the exchange rate side of things.


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## tronic72 (14 January 2011)

Regarding this, Im think CSR and Boral might seem some upside to the floods. All those homes and businesses will need plasterboard replacing because it doesn't like water..

Interested to see what other member think of this theory.

T


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## Julia (14 January 2011)

One of the problems is going to be the lack of workers.  Heard an electrician saying this morning it would be months before all the people who need to have their houses certified as safe can get this done.  All the tradies who will be needed won't find all their usual work stops in the meantime.

Then when the NBN seriously gets under way, that's going to absorb quite a bit of labor.


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## skc (14 January 2011)

doctorj said:


> Have just seen some updated numbers through for those interested, Suncorp and IAG have received 3,400 claims between them, so loss estimates probably up quite a bit from Monday given there are other insurers in the market.  Fitch put out a note this morning saying that IAG should be reinsured for losses above $15mm and Suncorp is covered up to about $5.6bn of claims.




Any shorting of insurers AFTER the flood is probably a bit too late to the scene, as the market has already moved on and looking forward on the increased premiums.

However, being a bit contrarian - I think IAG's market share in QLD will take a hit. They don't offer flood insurance as automatic in their home and contents policy. It will mean that people will be angry/disappointed/cry on Today Tonight when they realise they are not covered. IAG will receive heaps of bad press and a lot of switching out imo.



prawn_86 said:


> Does anyone know of any listed shopfitters or something in that sort of industry? As they will have a lot of work coming up. I did a search but couldn't find anything




GWA makes bathrooms/kitchen fittings and already has a decent run. ABC (Adelaide Brighton) and HIL may also benefit.

Plant hire will get a boost (BOL, CRG).

Waste management may be? 

Again, the time to buy/sell was Monday, not today.

Just look at FBU's chart after NZ earthquake and see how short term the effect was.


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## skc (14 January 2011)

Another thing to keep in perspective. ~20,000 homes suffered various extent of damage in Brisbane/Ipswich areas.

Annual housing starts in Australia is ~550K. So even if all the buildings are rebuilt it adds only ~3.5% to the volume.


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