Tobacco shares fall on hint of China ban

Shares in Imperial Tobacco and British American Tobacco fell earlier this week in London after traders said a story in Hong Kong’s South China Morning Post newspaper had reported that health authorities in China aimed to roll out a nationwide smoking ban in enclosed public places by the end of this year, according to a story by Alistair Smout for Reuters.

“With China, there’s a lot of concern over smog and air pollution,” Alastair McCaig, an analyst at IG, was quoted as saying. “The doors have been flung open with regards to reform, and with that will come a change in standards with regards to health care.

“It will increasingly become the focus, and that’s a battle that tobacco are going to have to face in the coming years.”

Defensive stocks outperform in times of economic uncertainty and the tobacco sector gained strongly in the first half of 2013, climbing 15 percent, according to Smout.

However, since then, the sector has given away its gains as investors rotate into stocks more sensitive to growing economic optimism.