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Our briefing for Monday September 28, 2020:
Sep 28, 2020 3:57:15 PM
- In the United States, House Democrats are preparing a new coronavirus relief package that will be a scaled down version of the one proposed back in May. Speaker Nancy Pelosi has instructed her committee chairs to put together a proposal with a topline of about $2.2 trillion - one trillion less than what the Democrats originally proposed back in May. However, this scaled back version is still almost one trillion more than the high-end Republicans are willing to agree to. A few weeks ago, the Trump administration said it would be willing to consider a proposal around $1.5 trillion. Even politicians are seemingly fed up with the process with one Democratic representative saying if this new proposal is nothing more than a messaging exercise by his party, it will be worthless.
- In Canada, the country’s most populous province had its highest daily COVID-19 case count since the outbreak began in late January. Ontario reported 700 new cases on Monday and Premier Doug Ford said the province is indeed experiencing its second wave, which will be more complicated and complex than the first wave. While Premier Ford has called the case count deeply concerning, he is not yet willing to move on any new public health measures, but a group of medical doctors and experts want the government of Ontario to return to Stage 2 of its reopening plan, which would put a halt to things such as indoor dining. Elsewhere in the country, Quebec is expected to move its two largest cities – Montreal and Quebec City from orange to its highest COVID-19 alert level – red. Both cities have experienced triple digit numbers in daily cases, and the province’s health minister has urged the public to stop socializing for the next month to help slow the spread of the virus.
- In the United Kingdom, Boris Johnson’s government has raised the prospects of even tougher coronavirus rules as they try to get the latest wave under control. Speaking on BBC radio, health minister Helen Whately was asked if the government was considering a “total social lockdown” and her response was that it couldn’t be ruled out. The Times are reporting new restrictions under consideration include a ban on different households mixing and shutting down pubs, bars and restaurants yet again.
- In France, hospitals in the Paris and Marseille regions are delaying scheduled operations to free up space for COVID-19 patients. Coronavirus admissions in southern France have tripled since the beginning of September with 55 ICU beds occupied on September 1st and 170 by September 27th. Due to the situation getting more dire in the Marseille region, bars and restaurants will be closed for seven days as of Sunday night and will be reviewed upon completion. If the situation shows no improvement, the closures could be extended.
- India surpassed six million coronavirus cases over the weekend. Concerns are now mounting the situation could get worse as the country approaches its autumn festival and wedding season. This will cause people to gather for religious ceremonies and social celebrations. India’s capital city of Delhi is also bracing for its pollution season, which is caused by farmers in the surrounding areas burning the stubble of their rice fields. Health experts have warned the pollution could worsen the conditions of people infected with the virus.
- In Australia, the premier of Victoria state and the Prime Minister of the country seem to be at odds on a lockdown implemented almost two months ago. Over the weekend, Victoria state Premier Daniel Andrews announced the end of a night curfew in Melbourne sooner than originally expected as infections in the country’s second largest city slows. However, Prime Minister Scott Morrison is looking to urgently reboot Australia’s struggling economy and needs Melbourne to do so. “As it stands this lockdown is already longer than that faced by residents in many cities around the world, said Morrison. We remain deeply concerned about the mental health impacts of a prolonged lock down on Melbourne residents.” Premier Andrews has angered pro-business groups in the region with his plan to keep most businesses and restaurants closed until the state reduces its 14-day rolling average to 5 new cases per day. The figure is currently 20.3 as of Monday.
Covid-19 – Due Diligence And Asset Management
Foresight White Paper Reveals Significant Differences in Pandemic Resilience Across Infrastructure Sub-Sectors
Brief: A new study published today by Foresight Group (Foresight) into the resilience of infrastructure to global pandemics reveals that renewable energy, telecoms and primary care have proved to be the most pandemic resilient.The analysis, which examines 23 infrastructure sub-sectors spanning economic and social infrastructure, shows that while infrastructure as an asset-class has proved to be highly pandemic resilient, with many sub-sectors largely immune to the impact, there are substantial differences in the performance of various infrastructure sub-sectors. Foresight’s white paper “Infrastructure Pandemic Resilience: a true test of infrastructure’s defensive characteristics”, considers the resilience of infrastructure to global pandemics through five investment fundamentals: revenues; costs; financials; political and regulatory environments; and operations. The study was based on a proprietary pandemic resilience framework developed by Foresight, a leading independent infrastructure and private equity investment manager.
Investors ‘Freaking’ Over Possible Contested Outcome of US Election
Brief: A disputed result in November’s US presidential election is now the number one concern for investors – even ahead of a second wave of Covid-19, according to a new global survey. The poll carried out by deVere Group, one of the world’s largest independent financial advisory and fintech organisations, asked more than 700 clients ‘What is your biggest investment worry for the rest of 2020?’ A contested U.S. election was the number one (72%); the impact of a Covid-19 second wave (18%) and U.S.-China trade war (5%). The remaining 5% was made up of other geopolitical issues, including Brexit. 735 people resident in the UK, North America, Europe, Asia, Africa, Latin America and Australasia took part in the poll. Of the poll’s findings, deVere Group CEO and founder, Nigel Green said, “Investors around the world are beginning to freak about the U.S. presidential election. “But not about whether Trump or Biden wins, rather over the looming possibility of a disputed outcome. “President Trump is already questioning the legitimacy of the election, heightening the chances of a contested result and an ensuing constitutional crisis in the world’s largest economy.
Geopolitics and Investment in Emerging Markets After COVID-19
Brief: As investors ponder the impact of the world’s greatest economic crisis since the Great Depression, emerging markets (EMs) face a swift reversal of fortune. Some of the fastest-growing economies in the world have been brought to a virtual standstill, reeling with the effects of an exogenous shock to demand, a public health emergency, and nascent infrastructure with which to combat the pandemic. While multilateral development banks and international financial institutions have moved swiftly to address critical funding shortfalls, the COVID-19 pandemic has dealt severe challenges to the EM growth model — and to the livelihoods of people within these countries. As governments in emerging markets and developing economies (EMDEs) have less fiscal space at their disposal — but harbour an ongoing need for spending on relief and stimulus measures — credit downgrades from the ratings agencies may be inevitable. Yet, even in the wake of downgrades, this juncture of COVID-induced distress might open up a propitious opportunity for international investors and companies to invest in infrastructure in EMDEs.
Eurozone Recovery Could Face More Setbacks
Brief: The next stage of the eurozone's recovery from the impacts of the COVID-19 outbreak could be challenging, according to a report by S&P Global Ratings. The rating agency and research firm revised its forecast for eurozone gross domestic product downward to 7.4% this year, from the 7.8% it estimated in June. The firm said the eurozone will see a 6.1% rebound in 2021, up from the 5.5% it forecast in June. "We are lowering slightly our expectations for unemployment, which we forecast will peak at 9.1% in 2021," said Marion Amiot, senior European economist, in a news release. S&P's report said the eurozone's unemployment rate will gradually reduce to 8.4% in 2022 and 7.8% in 2023. The unemployment rate is currently 8.1%, up from 7.6% in 2019. European economies are operating at around 5% below their pre-COVID-19 output levels and are estimated to return to pre-COVID-19 levels only in 2022. The eurozone recovery is currently considered to be shaped like a check mark, with flat growth expected to follow the 2021 rebound, according to the firm's analysis. "The eurozone is now entering a tricky transition period from gradual withdrawal of government support toward implementation of the European Union's economic reform program. Liquidity, households' behavior and demand will be crucial in enabling the European economy to weather this transition, and much could go wrong along the way," Ms. Amiot said.
Hedge Funds Are Slow-Walking Wall Street’s Return to the Office
Brief: As the finance world tiptoes back into the office, some of the biggest hedge funds are opting to keep their workers at home into 2021. While Wall Street firms including JPMorgan Chase & Co. and Citigroup Inc. ramp up attendance at their global headquarters, staff at Bridgewater Associates, D.E. Shaw & Co. and Two Sigma Investments are unlikely to be back until next year, according to people familiar with the matter and company officials. Banks often have their own buildings, but hedge funds usually work in shared locations with less control over how the lobby and elevators are managed. Some are choosing to wait and learn from how others’ returns pan out, a position helped by the fact that productivity has stayed high, according to the people. Two Sigma, which has about 1,500 U.S. employees, told workers they won’t be required to return before July 4, one of the people said, asking not to be named because the information isn’t public. Those who miss being at their desks can go in from January. Still, some hedge funds are pushing ahead. About 40% of Capstone Investment Advisors’ New York staff is in the office. To give employees time for creative thinking, the firm has created “meeting-less Wednesdays.”
Emerging Markets on Edge as Goldman and Deutsche Bank Flag Risks
Brief: Emerging markets are heading toward the end of the third quarter with more reasons to be cautious than optimistic. Developing-nation stocks, currencies and bonds had their worst week in the five days through Friday since the coronavirus pandemic rocked global markets in March. The gap between implied volatility in emerging-market currencies and their Group-of-Seven peers is at the widest since June amid concerns over renewed lockdown measures and delays to further U.S. fiscal stimulus. Emerging-market exchange-traded funds suffered the biggest weekly outflow since early July as assets tumbled. Manufacturing reports from China, India, Brazil and South Africa that are being published this week are potentially less decisive for investors than the global sentiment toward risky assets. Investors are bracing for higher price swings around the U.S. November elections, with the first presidential debate between Donald Trump and challenger Joe Biden scheduled for Tuesday. And they’re being encouraged to move to the sidelines. Deutsche Bank AG is taking a “more defensive stance” on emerging-market credit as it expects increased volatility from the U.S. election to fuel a selloff in risky assets. Never mind that the wave of central-bank stimulus and investors’ hunger for yield had lifted developing-nation dollar debt for five months.
