Stock Market Opportunities After Earthquakes: Understanding the Investment Logic of Earthquake Concept Stocks

“Earthquake Effect” in the Taiwan Stock Market

On April 3, 2024, the day Taiwan experienced an earthquake, the Taiwan stock market opened with a drop of 158 points, falling to 20,270 points. Interestingly, the entire market showed a clear divergence: while stocks in traditional industries generally suffered setbacks, a group of special stocks rose against the trend, with China Steel Structure hitting the daily limit, and steel, cement, and electrical wire and cable stocks also turning green. These rising stocks, riding the wave, are known as the “Earthquake Concept Stocks.”

Why Do Earthquakes Drive These Stocks Up?

The reason earthquake concept stocks perform remarkably during disasters actually reflects a simple market logic: Natural disasters often mean reconstruction opportunities.

When an earthquake damages buildings, infrastructure, and various facilities, there is a huge demand for construction materials, engineering services, and equipment for recovery. This expectation causes investors to automatically focus on companies related to the following sectors:

Construction and Building Materials Companies — Earthquakes cause building damage, directly stimulating demand for seismic-resistant materials, cement, and steel. After the April 2024 earthquake, cement stocks Taiwan Cement, Jia Cement, etc., rose over 1.5%, and steel stocks Hung Steel, Chun Yuan, etc., increased over 3%, exemplifying this logic.

Medical and Rescue Industries — Earthquakes cause casualties, leading to a surge in demand for medical equipment and pharmaceuticals, with related companies experiencing a significant short-term increase in orders.

Power and Communication Infrastructure — Earthquakes destroy power grids and communication facilities, requiring rapid repair equipment. Cable stocks like Huaxin also rose over 1% after the earthquake.

Earthquake Monitoring and Early Warning — Providers of such technical services gain attention due to society and government’s focus on disaster prevention.

Specific Cases: Stock Performance After April Earthquake

China Steel Structure (2013.TW) Short-term Surge

On April 3, 2024, the day of the earthquake, China Steel Structure’s stock price gapped up to hit the daily limit at NT$66.3. This stock became the brightest star of the day. However, this dazzling performance was not lasting — within a month, the price fell back from over NT$60 to around NT$55.

In the medium term, as a leading company in the steel structure industry, China Steel Structure’s orders are booked into next year. The Q1 2024 financial report shows revenue of NT$4.645 billion, net profit after tax of NT$118 million, and EPS of NT$0.59, indicating steady performance but limited growth potential.

Taiwan Cement (1101.TW) Continual Rise

Taiwan Cement maintained an upward trend since March, but its momentum was not solely due to earthquake concepts. The company benefits from stable domestic cement demand and the high-performance concrete produced through its investment in Asia Eastern Development, which has received praise in super high-rise construction. Earthquake was just a short-term catalyst; long-term growth is supported by fundamentals. In June, Taiwan Cement’s consolidated revenue reached NT$13.659 billion, a 54.94% increase year-over-year, reflecting the company’s core competitiveness.

Huaxin (1605.TW) High Volatility

Huaxin experienced a brief surge in April but quickly retreated into sideways consolidation. Although its cable business benefited from Taipower’s resilient grid plan, international nickel prices fell below US$20,000, leading to a decline in resource business revenue. In the first five months, consolidated revenue was NT$71.443 billion, down 15.59% from the same period last year, indicating limited imagination space from the earthquake.

Earthquake Concept Stocks in the US Market

The US stock market also exhibits similar patterns. Engineering contractors often benefit from disaster reconstruction:

AECOM (ACM) — As a major US government contractor, its business covers highways, bridges, water facilities, and other infrastructure. Federal disaster relief projects after natural calamities become significant revenue sources.

Fluor (FLR) — Also a government contractor, providing engineering, procurement, construction, manufacturing, and other comprehensive services. Post-disaster reconstruction increases its workload.

Quanta Services (PWR) — Specializes in infrastructure solutions for power, oil, natural gas, and communications industries. The repair needs for communication and power equipment damaged by earthquakes are within its expertise.

The Trap of Earthquake Concept Stocks: Short-term Opportunities vs. Long-term Risks

What does history tell us?

Looking back at Taiwan’s three major earthquakes over the past 25 years — the 1999 921 earthquake, the 2016 Meinong earthquake, and the 2018 Hualien earthquake — a clear pattern emerges: The impact of earthquakes on stock prices usually lasts only one to two weeks.

The 1999 921 earthquake was the most severe, with the stock market even halting trading for a week. But after a week, the market returned to fundamental logic, and the short-term excess returns of earthquake concept stocks disappeared, with prices returning to their true value. The situation in April 2024 is exactly the same — the good performance of earthquake concept stocks lasted only about a week.

Risks Investors Need to Recognize

First, earthquakes are inherently unpredictable. You cannot pre-position, nor know when the next one will occur or how extensive its impact will be. This uncertainty itself carries significant risk.

Second, the long-term financial impact on companies is limited. For most listed companies, a natural disaster does not change their fundamentals. China Steel Structure’s quick retreat after hitting the limit-up, and Huaxin’s decline due to nickel price drops, all show that ultimately, stock prices must revert to the company’s actual operational status.

Third, industry prosperity is the key factor. Taiwan Cement’s upward trend is not because of earthquakes but because of excellent performance in its investment projects and record-high revenue. That is the real force supporting the stock price.

Rational Investment Strategies for Earthquake Concept Stocks

Short-term vs. Long-term Choices

If you want to profit from earthquake concepts, you need to understand that this is a time-limited game. Once the earthquake occurs and market hype begins, you have about one to two weeks to realize gains. Missing this window, stock prices will automatically “cool down” and revert to fundamentals.

Do Your Homework, Select Truly Valuable Companies

Instead of blindly following earthquake concepts, research companies with sustained demand in earthquake-prone areas:

• Long-term order status of seismic-resistant materials and engineering firms
• Actual performance growth of infrastructure service providers
• Government infrastructure investment directions and scale

Taiwan Cement’s success lies in the fact that earthquakes are just a short-term catalyst; the real driver of stock prices is the performance growth of its investment projects and core business.

Risk Management Is Crucial

Due to the high volatility of earthquake concept stocks, investors should:

• Avoid heavy concentration
• Set clear profit-taking and stop-loss points
• Not expect earthquakes to rescue fundamentally weak companies

Conclusion

Earthquake concept stocks reflect the market’s anticipatory response to disaster reconstruction needs. This phenomenon is not rare; similar logic exists after other natural disasters or major events. But rational investors should recognize that: Short-term emotional fluctuations will eventually settle, and long-term gains come from the company’s fundamentals.

The opportunities in earthquake concept stocks are real, but the window is very short. If you decide to participate, do your homework, set risk boundaries, and remember: Good companies are worth paying attention to on their own, without waiting for disasters to remind you to invest.