Why stock markets stayed calm in southern Asia despite tsunami

The bonds of the affected countries, as well as their currencies — which can be volatile even in benign circumstances — suffered few ill effects, either.

‘‘The stock markets in the region have generally not been impacted by the disaster and, in fact, have behaved differently than expected,’’ said Mark Mobius, manager of the Templeton Global Emerging Markets fund, in a note to investors.

Markets in Indonesia and India ended the trading week after the tsunami more than 1 per cent higher, while the Thai and Malaysian markets were little changed. Sri Lanka’s market fell sharply immediately after the disaster, then got most of the lost ground back later, ending the week down about 4 per cent.

In the month ended Friday, stocks rose in all these countries except for India; for American investors, returns were higher in all five countries because their currencies rose against the dollar.

Paul Niven, head of strategy at F&C Asset Management, a fund management company in London, pointed out that many Asian stock markets have continued to rally this year. ‘‘Such behaviour may seem odd at a time of such unprecedented disaster across numerous countries,’’ Niven said, ‘‘but it does appear that markets are behaving entirely rationally.’’

He and other investment professionals say there was no widespread selling because the tsunami damage, though extending for thousands of miles along the Indian Ocean’s rim, had negligible impact on the industrial capacity. It may seem perverse when juxtaposed with the immense loss of life, analysts say, but the disaster may even produce economic and commercial benefits as rebuilding begins.

The tsunami resulted in ‘‘a tragic human loss, but it turns out much of the damage was done in outlying areas where not much of the production is focused,’’ said Anthony Chan, an economist at J.P. Morgan Fleming Asset Management in New York.

By contrast, said Chan, who has studied market effects of past natural disasters, ‘‘if something like that would have hit central Tokyo or Beijing, investors would have hit the sell button.’’

But after such events, he said, markets tend to recover as attention shifts to reconstruction and the accelerated economic output that accompanies it.

‘‘Whenever there’s a typhoon or other natural disaster, once rebuilding takes place it adds to overall economic growth,’’ he said. In the case of the tsunami, he added, ‘‘the huge amount of aid will be a positive contributor to growth.’’ Chan and others drew a distinction between natural disasters and events that originate with human menace or meddling, and they said investors were doing the same. ‘‘Why no panic? People understand that earthquakes haven’t suddenly become more likely,’’ said Jerome Booth, research director at Ashmore Investment Management, a London firm specialising in emerging markets.

He contrasted the tsunami and its randomness with ‘‘the increase in uncertainty surrounding events of terrorism and disease, like SARS.’’ He was referring to the outbreak of SARS that had a negative effect on Asian markets last year.

—NYT