April 27 (Bloomberg) -- Airlines and meat-processing companies slumped in Asia on concern the growing number of swine-flu cases in the U.S. and Mexico will slow a recovery in the global economy and hurt earnings. Medical shares gained.

Korean Air Lines Co., South Korea’s largest carrier, lost 7.4 percent, while China Yurun Food Group Ltd., the country’s biggest hog processor, tumbled 10 percent in Hong Kong trading. Chugai Pharmaceutical Co. and South Korea’s Yuhan Corp. both surged by at least 14 percent on speculation demand for the antiviral drug Tamiflu will increase, helping drive the MSCI Asia-Pacific Health Care Index to the largest gain among the regional index’s 10 industry groups.

The MSCI Asia-Pacific Index retreated 0.4 percent to 89.13 as of 4:01 p.m. in Hong Kong. The spread of swine flu, a respiratory disease of pigs caused by type-A influenza, raised concern that the outbreak will be worse than the severe acute respiratory syndrome, or SARS, epidemic in 2003 that killed 774 people and infected 8,098 globally.

“The memory of the SARS epidemic is still fresh on the minds of investors in Asia,” said Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, which manages $27 billion of Asian assets. “It’s the usual trade of avoiding airlines and buying drugmakers, insurance.”

U.S. President Barack Obama’s administration has declared swine flu, normally spread among pigs, a public health emergency after 20 people contracted the disease. More than 80 people have died in Mexico, where the first cases were discovered.

Flu Strains

Three main human flu strains -- H3N2, H1N1 and type B -- circulate and cause 250,000 to 500,000 deaths a year in seasonal epidemics, according to the World Health Organization. Pandemics occur when a novel influenza A-type virus, to which almost no one has natural immunity, emerges and begins spreading.

Korean Air lost 7.4 percent to 37,800 won, its largest drop since Jan. 15. The airline, which operates two weekly flights to Mexico via an agreement with Consorcio Aeromexico SA, doesn’t plan to cancel flights because of the outbreak in Mexico, it said in an e-mail today.

China Southern Airlines Co., the nation’s biggest air carrier, dropped 17 percent to HK$1.83, while Cathay Pacific Airways Ltd., Hong Kong’s largest, plunged 8.1 percent to HK$8.41. Japan Airlines Corp., Asia’s largest carrier, retreated 4 percent to 191 yen. The airline set up a task force to monitor the outbreak, though its flights to Mexico via Vancouver are operating normally, spokesman Satoru Tanaka said today.

Declines led the Bloomberg Asia Pacific Airlines Index lower by 6.1 percent, set for its biggest retreat since October 2008.

Economic Consequences

“Travel gets impacted rather quickly and savagely during virus outbreaks,” said Prasad Patkar, who helps manage the equivalent of about $800 million at Platypus Asset Management in Sydney. “The market clearly believes that the swine-flu outbreak will have economic consequences.”

H.I.S. Co., Japan’s second-largest travel company, declined 10 percent to 1,558 yen after spokesman Takashi Nakatani said the company will make a decision on its tours to Mexico today. Kinki Nippon Tourist Co., a rival tour agency, retreated 8.6 percent to 107 yen.

Hotel operators also declined. Shangri-La Asia Ltd., the region’s biggest luxury hotel manager, slid 8.7 percent to HK$10.70, while Banyan Tree Holdings Ltd., a Singapore-based luxury resort operator that has a property in Mexico’s Riviera Maya district, tumbled 6.7 percent to 35 Singapore cents.

Hog processor China Yurun fell 9.9 percent to HK$9.03, set for its biggest plunge since Oct. 10. None of its livestock have been infected by swine flu and its operations have been unaffected by the outbreak, the company said today.

Pork Ban

China, Indonesia and Thailand are among Asian nations that have banned pork imports from Mexico and parts of the U.S. Still, Keiji Fukuda, the Geneva-based WHO’s assistant director-general for health security and environment, said there’s no evidence the disease is spread by exposure to “pork or pigs.”

People’s Food Holdings Ltd., a meat producer listed in Singapore, retreated 5.7 percent to 50 Singapore cents. Nippon Meat Packers Inc., Japan’s biggest producer of ham and sausage, declined 4.4 percent to 1,010 yen.

Chugai Pharmaceutical, a unit of Roche Holding AG and a seller of Tamiflu, surged 14 percent to 1,845 yen, its largest gain since January 2000. Yuhan, the biggest South Korean drugmaker by market value, soared by the 15 percent daily limit to 211,500 won, the biggest gainer on the MSCI regional health- care index. The company was chosen in 2006 to supply Roche Holding AG with a key ingredient to make Tamiflu.

Cipla, Biota

Cipla Ltd., India’s second-biggest drugmaker by market value, climbed 2.4 percent to 245.95 rupees after saying it can supply 1.5 million doses of generic Tamiflu drugs to fight the outbreak. Biota Holdings Ltd., which earns royalties from sales of GlaxoSmithKline Plc’s flu drug Relenza, jumped 82 percent to A$1.58 in Sydney trading.

In Malaysia, Top Glove Corp. rallied 7.3 percent to 5.90 ringgit, set for its highest close since Jan. 14. The world’s largest rubber glove maker expects global demand to increase 5 percent in the next three to four months because of the spread of swine flu, Chairman Lim Wee Chai said today.

Universal Inc., a Taiwanese maker of non-woven fabrics such as baby diapers and surgical gowns, rose 6.8 percent to NT$12.50, while TTY Biopharm Co., a drugmaker, rose by the daily limit of 7 percent to NT$88.80, the highest since it went public in Taipei in 2001.

“As the concerns increase, these companies stand to gain,” said Stanley Chou, a fund manager at Mega International Investment Service, a unit of Taiwan’s third-largest financial service company. “With other stocks falling, these shares look least vulnerable.”

To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net

Last Updated: April 27, 2009 04:07 EDT