.png?width=200&height=78&name=CH%20Diligence%20(thicker%20line).png "CH Diligence (thicker line).png")
Our briefing for Wednesday June 30, 2021:
Jun 30, 2021 3:47:43 PM
- In the United States, health officials are growing more concerned about the Delta variant as it now accounts for more than 25% of the coronavirus cases in the country. While the overall numbers are significantly better compared to previous waves of the virus, there are still close to 300 people dying per day in the United States due to the coronavirus, which US Surgeon General Dr. Vivek Murthy says is still “just far too many”. Federal health officials are struggling to get vaccination rates up in certain states, which is a breeding ground for the Delta variant to take hold. For instance, in Mississippi, where just 29.7% of the population are fully vaccinated, unvaccinated people have accounted for 90% of the COVID-19 cases and deaths in the past month.
- Bloomberg is reporting Canada’s economy shrank less than expected during a spring surge of coronavirus cases that saw many provinces head into strict lockdowns. According to estimates from Statistics Canada released on Wednesday, the country’s GDP contracted by 0.3% in April and by a similar amount in May. The resilience shown by the economy is expected to fuel a strong rebound heading into the summer months. Canada’s most populous province – Ontario – moved into its second stage of reopening on Wednesday, which allows for more outdoor activities and more indoor services, such as haircuts to resume. The reopening comes on the same day Ontario reported its lowest single-day case number the province has seen since September 10th with just 184 new cases.
- In the United Kingdom, over 26,000 new COVID-19 cases were recorded on Wednesday – the highest number since January. While the higher case load isn’t good news, the silver lining is that the vaccines are having an effect in driving down deaths. For instance, when the numbers were as high as they were on Wednesday – January 29th – 1,245 COVID-19 deaths were recorded; compared to just 14 now. Prime Minister Boris Johnson’s official spokesperson said the increase had been anticipated and that the country remained in “good position” to continue with lifting of lockdown restrictions in a matter of weeks.
- France’s leading scientific adviser said on Wednesday that the country is likely to have a fourth wave of the COVID-19 virus, due to a resurgence of cases caused by the Delta variant. The wave – expected to hit sometime in September or October – though may be similar to what the UK is experiencing with the rollout of COVID-19 vaccines helping mitigate the effect. “I think we will have a fourth wave, but it will be much more moderate than the previous three waves because the level of vaccinations is different compared to before,” said Professor Jean-Francois Delfraissy to French radio. Earlier in the week, French Health Minister Olivier Veran said the Delta variant, first discovered in India, now accounts for around 20% of the coronavirus cases in the country.
- Singapore is changing the way it reports on progress against COVID-19. Looking to shift away from its “Covid-Zero” strategy of trying to crush the virus entirely through stiff border controls, aggressive contact tracing and social distancing, the Ministry of Health will instead focus on key trends and the number of severe cases. The “Covid-Zero” strategy has kept the caseload in the city-state well below that of its Southeast Asian neighbours, but serving as a financial hub, risks being left behind as other financial capitals start to reopen. Government officials are drawing up a roadmap for the city’s economic future that works on the assumption COVID-19 won’t go away for several years.
- Australia continues to battle the latest coronavirus cluster with seven Australian cities now in lockdown to try and contain the spread of the more highly contagious Delta variant. The only area spared currently seems to be Melbourne, which went through its own outbreak earlier this month. Otherwise, Sydney, Brisbane and Gold Coast to the east, Townsville and Darwin towards the north, Alice Springs in the central and Perth to the west are in some form of a lockdown. The seven cities account for nearly half of the population – 12 million – that are under stay-at-home orders. Across the country on Wednesday, state leaders said they were facing a “pressure cooker situation” as new cases emerged.
Covid-19 – Due Diligence And Asset Management
Kaplan says Fed Will Avoid 2013 Taper Tantrum This Time Around
Brief : The Federal Reserve’s tapering of its asset purchases, which he hopes will start “soon,” will run smoother this time around because investors already know that a move is being discussed, said Federal Reserve Bank of Dallas President Robert Kaplan. “I want it to get out into the market, and I think this debate we’re having at the FOMC, some of it publicly, is good,” Kaplan said Wednesday in an interview with Michael McKee on Bloomberg Television, referring to the Federal Open Market Committee. “People are on notice that these adjustments are coming, the only question is when.” Kaplan said the Fed learned a number of lessons in 2013, when it first announced a slowing its purchases of Treasuries and mortgage-backed securities following the global financial crisis. The news caused a violent spasm in financial markets as investors sold riskier assets for the safety of bonds in an episode dubbed the “taper tantrum.” The central bank has been purchasing $80 billion of Treasuries and $40 billion of MBS monthly since last year to support the U.S. economy during the pandemic. Chair Jerome Powell said earlier this month that the taper debate was getting into gear and would continue at coming FOMC meetings.
Event Driven Hedge Funds Latch Onto M&A Boom, as Potential for Returns Has “Never Been Better”
Brief: Event driven hedge funds are making hay amid soaring levels of corporate activity, with new stats showing these managers raked in their best first-quarter returns in almost 30 years, as a number of newly-launched strategies look to get a piece of the M&A action. Event driven managers – which seek to capitalise on stock mispricings and other valuation anomalies stemming from mergers and acquisitions, bankruptcies, takeovers and other corporate events using activist, merger arbitrage and special situations strategies – posted a first quarter composite return of 7.3 per cent, according to new research by bfinance, their strongest Q1 showing since 1993. M&A activity has rapidly picked up momentum since the third quarter of 2020, and since the start of 2021 volumes have risen to more than USD2.4 trillion globally, as economies look to recover from Covid-19 and deals put on hold during the pandemic are kickstarted. Against that backdrop, event driven strategies advanced 11.7 per cent in the first five months of 2021, according to data published by Hedge Fund Research, outflanking HFR’s industry-wide Fund Weighted Composite Index, which was up 9.92 per cent over the same period.
Warren Buffett says Pandemic’s Impact Still Hard to Predict
Brief: Billionaire Warren Buffett says the one constant throughout the coronavirus pandemic has been that it has been difficult to predict how it would affect the economy, but clearly it has devastated many small businesses and individuals while most big companies have fared OK. “The economic impact has been this extremely uneven thing where I don’t know how many but many hundreds of thousands or millions of small businesses have been hurt in a terrible way, but most of the big, big companies have overwhelmingly have done fine, unless they happen to be in cruise lines or, you know, or hotels or something,” Buffett said in an interview that aired on CNBC Tuesday night. Buffett and Berkshire Hathaway Vice Chairman Charlie Munger touched on a variety of topics during the interview. Munger said China had the right approach to the pandemic by essentially shutting down the country for six weeks. “That turned out to be exactly the right thing to do,” Munger said. “And they didn’t allow any contact. You picked up your groceries in a box in the apartment and that’s all the contact you had with anybody for six weeks. And, when it was all over, they kind of went back to work. It happened they did it exactly right.”
Substantial Corporate Changes for one in two Trusts Since Onset of Pandemic
Brief : Almost one in two investment trusts from the Association of Investment Companies (AIC) has undergone corporate activity in the past five years, new data has revealed. While a degree of corporate action is regular in the investment company space, since the onset of the pandemic more substantial changes have become the norm as boards are under increasing pressure to prove shareholder value. The figures showed 47% of investment companies have undergone a manager change, merger, fee change, policy change or liquidation since the beginning of 2016, with some undergoing multiple changes. In the last 18 months alone, 11 companies have changed their manager, with two more currently undergoing strategic review, compared to 18 in the previous four years. Additionally, 11 companies have been liquidated, 12 have seen policy change and there have been three mergers. "Since the onset of the pandemic, investment company boards have been particularly proactive in addressing performance and other issues such as liquidity," said Annabel Brodie-Smith, communications director at the AIC.
The Global Economy Could Lose $4 Trillion Due to Covid-19’s Impact on Tourism
Brief: The pandemic-related collapse in international tourism could cost the global economy as much as $4 trillion for the years 2020 and 2021, according to a new United Nations report. The estimated losses have been caused by Covid-19's direct impact on tourism as well as its ripple effects on other sectors closely linked to it. The steep drop in international arrivals led to a $2.4 trillion loss in 2020 and the UN's report warns that a similar loss could occur this year with the recovery largely dependent on the uptake of global Covid-19 vaccines. The report states that while tourism losses are falling in most developed countries, the situation is deteriorating across much of the developing world due to vaccine inequality. While the industry is expected to rebound faster in countries with high vaccination rates such as the France, Germany, Switzerland, the United Kingdom and the United States, experts don’t expect a return to pre-Covid-19 international tourist arrival levels until 2023 or later. The report bases its loss estimates for 2021 on three scenarios involving different drops in tourism arrivals as well as varying vaccination rates. The most severe scenario involves a 75% reduction in tourism arrivals which would lead to a $2.4 trillion loss this year.
Lazard to Allow Dealmakers to Work From Home Twice a Week
Brief: Lazard Ltd. said any employee working in its U.S. offices must be fully vaccinated against the coronavirus by July 6, and North American financial-advisory bankers will have the option of working from home two days a week. The investment bank encouraged more employees to return to offices, calling the experience “vital” for younger workers, according to a memo to staff obtained by Bloomberg and confirmed by Lazard. Individuals can work remotely, subject to client needs, on Monday and Friday if they choose.
