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China Investors Pile Into Staples, Airlines as Floods Take Toll

A flooded residential community in Wuhan on July 12.
  • Materials and consumer staples best performing sectors in July
  • Flooding to accelerate fixed asset investment in second half

China’s worst flooding since 1998 has investors piling into shares of meat producers, airline operators and cement manufacturers as heavy rainfall continues to sweep across the country.

A gauge of consumer staples jumped 9.2 percent since the beginning of July, compared with a 3.9 percent gain for the benchmark CSI 300 Index, as flood waters inundated central China’s Yangtze River region, home to the country’s major rice, pig and fish farming areas.

Anhui Conch led cement makers, climbing 8.8 percent month-to-date. Airlines also jumped, with a key gauge rising 8.9 percent this month as flood waters swept over several railway lines and collapsed bridges.

"The market is pricing in expectation that the flood may worsen. I see rally of staples, airlines, construction firms to sustain as investors expect solid earnings outlook due to the floods," says Linus Yip a strategist at First Shanghai Securities.

Supply shortages and widespread disruption to logistics networks as a...