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Our briefing for Tuesday June 2, 2020:
Jun 2, 2020 3:49:06 PM
- In the United States as all 50 states have at least partially reopened, several southern states have reported sharp increases in COVID-19 infections. Alabama, South Carolina and Virginia all saw cases rise at least 35% or more in the week ended May 31st, compared to the prior week. Cases have risen in 17 states overall, according to a Reuters report. United States Surgeon General Dr. Jerome Adams is the latest in a number of health experts who fears new outbreaks of the coronavirus will result from the nationwide protests of George Floyd’s death. In an interview, Dr. Adams highlighted the coronavirus pandemic has disproportionately affected communities of colour, noting "I remain concerned about the public health consequences both of individual and institutional racism [and] people out protesting in a way that is harmful to themselves and to their communities.”
- The doctor who was responsible for a new cluster of coronavirus cases in the Canadian province of New Brunswick is speaking out. Dr. Jean-Robert Ngola said he did not self-isolate upon returning from an overnight return trip to neighbouring province Quebec to pick up his four-year old daughter. The mother of the child had to travel to Africa for her father’s funeral. Dr. Ngola, who isn’t showing any symptoms, is unsure of where he obtained the virus noting, "Who can say? … The virus is circulating everywhere. … How many people are unwitting carriers?” Since word has circulated of his case, Dr. Ngola says he is now the target of racist harassment, false reports have been made to the police, and feels abandoned by public health officials. There are 12 new cases of the coronavirus in northern New Brunswick since May 21st. Prior, the province had gone two weeks without a new case.
- The United Kingdom government is considering a travel corridor with other countries who have low rates of coronavirus infection. Those nations that would fall under that criteria would not have to adhere to the UK’s 14-day self-isolation period, which is due to take effect on June 8th. The UK travel and hospitality sectors have warned that the government’s quarantine plan will further damage their industries which have already been hit hard by the coronavirus pandemic.
- In France, cafes and restaurants were allowed to open for the first time in 11 weeks after being closed due to the coronavirus lockdown. Restaurants and cafes still have to limit the number of customers due to social distancing rules and in the Paris region, customers can only be served on outdoor terraces until June 22nd. France’s finance minister has noted the economy will likely shrink by 11% this year but is convinced it will rebound in 2021 with the help of government support.
- Wuhan China’s Health Commission announced Tuesday that it had completed 9.9 million coronavirus tests of its residents with no new confirmed cases. There were 300 asymptomatic cases discovered in the testing, but China does not count asymptomatic cases as confirmed cases. The testing began on May 14th for the city of 11 million people, which was ground zero for the coronavirus epidemic.
- A Brazilian university study is projecting the country could reach 1 million cases of the coronavirus and 50,000 deaths by the end of the month. The study conducted by the Federal University of Rio Grande do Sul predicts the number of COVID-19 cases in Brazil will double in the next 18 days. As of Tuesday, Brazil has reported close to 527,000 cases and close to 30,000 deaths.
- Japan has announced the approval of saliva-based tests for the coronavirus as a way of boosting testing rates as the Tokyo government issued a stay-at-home alert following an increase in infections. The state of emergency was lifted in Tokyo last week, but the local government is urging people to stay at home for non-essential business and to practice social distancing as 34 new cases were reported on Tuesday, the most since May 9th. Japan’s testing rate is well behind other industrialized nations such as the United States, Italy and South Korea leaving critics to say the low rate of testing is making it difficult to trace the virus.
Covid-19 – Due Diligence And Asset Management
Private Equity Lands Billion-Dollar Backdoor Hospital Bailout
Brief: As the coronavirus pandemic upended the U.S. health-care system, EmCare IAH Emergency Physicians, a Houston staffing company owned by private equity firm KKR, made a little-noticed request of the government: It applied for a $317,379 interest-free loan. KKR had for years paid lobbyists to fend off efforts to ban a practice known as surprise billing used by EmCare and other providers that has driven up the cost of health care. But that didn’t stop the U.S. Health and Human Services Department from approving the loan and almost 300 others totaling more than $60 million to subsidiaries of KKR-owned companies. Shut out from many coronavirus relief programs, private equity companies have found a back door at HHS, where they have borrowed at least $1.5 billion, according to a Bloomberg News analysis of more than 40,000 loans disclosed by the department… Health-care facilities owned by Apollo Global Management, which started the year with about $46 billion, received at least $500 million in HHS loans. And Cerberus Capital Management’s Steward Health Care System LLC, which threatened to close a hard-hit Pennsylvania hospital, received at least $400 million in loans. Last month Cerberus was working to quadruple the size of a fund to invest in distressed loans to $750 million.
Wall Street Sends Wine, Masks to Clients with Steakhouses Closed
Brief: Wall Street investment funds won’t let a pandemic and riots stop them from wooing clients. With boozy steakhouse meetings no longer an option, evenings on the town are being replaced with wine tastings via conference call and online concerts. There are also care packages tailored to the times -- packed with masks -- and donations to food banks and charities. Disruptions set off by the coronavirus pandemic, now complicated by protests and curfews, are prompting asset managers overseeing products such as mutual funds and exchange-traded funds to figure out new ways to remotely grab the attention of wealthy customers, institutional investors and financial advisers. That often means trying to hobnob in the virtual world. It’s accelerating a shift that was already underway, as big firms rely less on social outings to generate and work leads, said Amanda Walters, principal at Casey Quirk, a division of Deloitte Consulting. “Asset managers are asking, ‘Do we need to be face-to-face as much as we were before?’ And the answer is probably no,” she said.
Goldman Sachs Commits to New Central Paris Headquarters
Brief: U.S. bank Goldman Sachs (GS.N) has signed a lease for a new Paris headquarters building, committing to a city centre office development at a time when many banks are weighing scaling back their presence in cities amid the COVID-19 pandemic. Goldman has signed a 12-year deal for 6,500 square metres of space at 83 Marceau, an office building being redeveloped a block away from the Arc de Triomphe, developer SFL said on Tuesday. The commitment represents 81% of the building’s floor space. The project is expected to be completed in the third quarter of 2021.
Relief Rally or Bear Market Bubble? For Investors, it’s Hard to Tell
Brief: What started as a bear market bounce in U.S. equities has transformed into one of the most dramatic rallies in memory, leaving investors looking to past rebounds, options markets and technical analysis for clues on how far it could run. The S&P 500 is up 37% since its late March close as of Monday and the Nasdaq Composite is near a fresh record after a surge that has seemingly ignored widespread economic upheaval and uncertainty over the coronavirus pandemic. The rally’s speed has left investors in a quandary. While few are willing to bet against a rebound that has steam-rolled most forecasts, some are concerned the market has become detached from economic reality by expectations of unlimited support from the Federal Reserve and U.S. lawmakers. The S&P 500, for instance, now trades at 21.2 times earnings, its highest level since 2002, even as unemployment is at levels last seen in the Great Depression. A Reuters poll showed investors expect Friday’s U.S. employment data to show a loss of 7.45 million jobs cut in May, after a record 20.5 million in the previous month.
No One Knows What Their Bond Fund is Worth
Brief: During the worst of the market chaos in March, some credit hedge funds suspended redemptions because they didn’t know what their holdings were worth and the prices of fixed income exchange-traded funds were out of whack with the net asset value of their underlying bonds. The prices for stocks, which trade on an exchange, are available in real-time. But bonds still trade over-the-counter, meaning a dealer and an investor negotiate a price, whether on a screen of over the phone. As a result, there is no central place to go for bond prices. Bond mutual funds, for example, use what are called evaluated prices from third parties such as ICE Data Services. ICE has analysts and algorithms gathering and assessing multiple sources of information scattered throughout the market to provide evaluated bond prices to investors, asset managers, dealers, and others. In March and April, as markets cratered and transactions ground to a halt, that information evaporated.
The Buy-Side Trader is Getting Outsourced in Coronavirus Crisis
Brief: A once-in-century disruption to securities trading is intensifying a revolution in how some investment firms conduct business. With at-home traders navigating the wildest market swings in history, more money managers are tapping outsourcing companies to buy and sell financial assets on their behalf. With their employees at risk of falling sick or losing regular access to market venues, the buy side in lockdown is turning to a booming industry that’s drawing big-gun entrants including State Street Corp., AllianceBernstein Holding LP and Wells Fargo & Co. In so doing, the largest providers are reporting a surge in revenues as transaction volumes jump and new clients sign up. Outsourced traders essentially act as a middleman between the buy side and sell side in handling trading flows. Some outsourced trading divisions are run inside bigger financial services firms, like Jefferies Financial Group Inc., while others operate as small, standalone shops. Their pitch to asset managers: Ensuring best execution with an extensive network of brokerages and high-speed technology, which can be expensive for smaller funds to maintain on their own.
