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Brief: Social impact investing in the UK has increased by almost eight-fold over nine years from GBP833 million in 2011 to GBP6.4 billion in 2020, according to new figures released by Big Society Capital, a UK social impact investor. The data, from Big Society Capital’s Annual Market Sizing Report, shows there has been consistent growth year-on-year with a particular acceleration between 2019 - 2020, the year of the pandemic, which saw a 26 per cent increase in the value of social impact investments in the UK (26 per cent 2019-2020 vs 21 per cent increase 2018-2019). Social property funds continue to account for the largest portion (45 per cent) of the social impact investment market and has seen eight-fold growth since 2016. Social lending accounts for 43 per cent of the market, seeing three-fold growth since 2011.
Brief: UK dealmakers are equally convinced that the biggest threats to completing deals in the next 12 months will be issues stemming from the pandemic and climate change. That's according to a survey of 400 UK and US-based dealmakers by Datasite, a leading SaaS technology provider for mergers and acquisitions (M&A) professionals. The research shows that 41 per cent of UK dealmakers expect the biggest M&A dealbreaker in the next 12 months to be Covid-19, just ahead of climate change at 40 per cent. By contrast, 48 per cent of US dealmakers expect climate change to be the biggest dealbreaker in the next 12 months, followed by Covid-19 at 32 per cent. “Britain’s economy has certainly come a long way following the darkest days of the pandemic, but we still have some labour and supply chain issues to resolve,” says Merlin Piscitelli, Chief Revenue Officer for Datasite in Europe, the Middle East and Africa.
Brief: Now that more than 18 months have passed since Covid-19 started sweeping the world, we have a good understanding of how the pandemic has affected real estate investments. In some ways, it has changed the game. In other ways, it has simply underlined a number of trends that were already shaping the sector. These ‘megatrends' will likely cross decades and decades, and have big implications for real estate - boosting some sectors and disrupting others. Below is a snapshot of the trends that have shaped 2020 to now, and how we see them developing in the coming decade. While we are not predicting the end of the office tower, we do expect a fall in their popularity with tenants. Global lockdowns have proven the viability of remote working and, even as the world normalises, many companies are adopting a hybrid working model going forward.
Brief: The adoption of environmental, social and governance (ESG) integration remains strong amongst global institutional investors, while a significant group has also placed greater emphasis on ESG considerations as a result of the Covid-19 pandemic, according to the 2021 RBC Global Asset Management (RBC GAM) Responsible Investment Survey. The 2021 survey highlighted that while ESG adoption remains near peak levels amongst institutional investors globally, there is a sizable group of institutional investors (29 per cent) who have placed greater emphasis on ESG considerations as a result of the Covid-19 pandemic. These investors are also the most vigorous supporters of ESG as an enabler of investment performance, as nearly all of this group (97 per cent) believe ESG integrated portfolios are likely to perform as well or better than non-ESG integrated portfolios, a significant difference compared to the overall global respondents who said the same (83 per cent).
Brief: Billionaire investor Ray Dalio believes the workplace will never return to pre-pandemic conditions as flexibility and technology became the major driving forces in the new world. “The future of the workplace is going to be characterized by probably two things — customization and technology. We’ve been given a gift to be able to rethink what we are doing,” Dalio said Wednesday at CNBC’s @Work Summit. “I don’t think we are going to go back to the old world.” “It’s going to be an erratically different kind of work — what is employment? How will technology be replacing people? How will that be dealt with? How will the wealth gap be dealt with...there are going to be many, many changes over the next five years,” Dalio added.
Brief: JPMorgan Chase CEO Jamie Dimon is not known for mincing words or hiding his emotions. So the fact that the leader of America's largest bank sounds very upbeat about the health of the US economy is noteworthy. Dimon said he is not worried about the possibility of inflation heating up in the next few months during a call with reporters about JPMorgan Chase's third quarter earnings Wednesday. He bluntly said "that's life" and added that the fact that we're even talking about inflation is a good thing because it's a sign that the worst of the Covid-19 pandemic, despite Delta variant fears, may soon be over. "We should all thank our lucky stars," Dimon told reporters about his expectation that the US may soon be turning a corner with regards to Covid-19 cases. Dimon even dismissed worries about all the headlines regarding supply chain disruptions due to the pandemic.
Brief: The pandemic has made workplace meetings more inclusive and efficient, according to a survey of more than 600 business leaders across Singapore, Australia and Japan. In Singapore, more than half of C-Suite executives who responded said they tried to open up conversations to a wider group of staff, the analysis from Tableau Software Inc. and YouGov showed. The loss of face-to-face interactions was a concern for two-thirds of executives in Australia, and leaders in Japan aged 44 and under said they had seen an improvement in workplace conversations, according to the study. Decision-making got faster during the pandemic, said JY Pook, senior vice president for Asia Pacific and Japan at Tableau, a data visualization software firm. “
Brief: CFA Institute, the global association of investment professionals, has released results from a survey it conducted on the career outlook of more than 15,000 current university students and recent graduates aged 18-25 from 15 markets. The results find that globally, 58 per cent of respondents still feel confident about their future career prospects in the wake of the Covid-19 pandemic. The findings also indicate that traditionally stable fields, such as finance, remain attractive for graduates navigating these uncertain times. In fact, respondents across all 15 markets ranked finance as one of the top five most valuable majors for finding a career. Overall, graduates felt that medicine/science was most stable and attractive, followed by healthcare and then education.
Brief: US multinational pharmaceutical manufacturer Merck’s new drug – which is designed to help reduce Covid-19 symptoms for people with Covid-risk factors including age, obesity, and diabetes – offers “great potential” to fully re-open the global economy, Man Group noted in market commentary on Tuesday. The London-listed global hedge fund giant’s ‘Views From The Floor’ note observed how the Goldman Sachs US Global Health Risk equities basket, which lagged the S&P 500 for much of 2021, has risen on the back of encouraging trials of molnupirarvir. The Health Risk equities basket – which includes airlines, tour operators and hospitality names including such as Royal Caribbean, Expedia, Delta Airlines, and Nordstrom – relies on the post-pandemic economic reopening, which has stalled in recent months after powering 2020’s stock market rebound. “
Brief: Certain key private equity numbers turned to point downwards in the third quarter of the year, including fundraising which fell by 21% year-on-year.Private equity, which was described as “performing well since the pandemic”, also saw ‘exit’ values fall by over 2% and Prequin - the data firm which published the Q3 figures - said “some signs of market softness may be appearing”.Aggregate private equity capital raised was $83 billion, down 21% year-on-year. Preqin said private equity exit activity had “cooled down slightly” and that exit values were down 2.4% year-on-year. However, North America remained the dominant source of “buyout deal flow”, having registered $107.2 billion in aggregate during Q3, compared to only $61.5 billion in the same period last year.
Brief: The International Monetary Fund is slightly downgrading its outlook for the global recovery from the pandemic recession, reflecting the persistence of supply chain disruptions in industrialized countries and deadly disparities in vaccination rates between rich and poor nations. In its latest World Economic Outlook being released Tuesday, the IMF foresees global growth this year of 5.9%, compared with its projection in July of 6%. “The global recovery continues but the momentum is hobbled by the pandemic,” IMF Chief Economist Gita Gopinath told reporters at a briefing. For the United Sates, the world's largest economy, the IMF predicts growth of 6% for 2021, below its July forecast of 7%. The downward revision reflects a slowdown in economic activity resulting from a rise in COVID-19 cases and delayed production caused by supply shortages and a resulting acceleration of inflation.
Brief: Traders and investment banking staff who plan to work from home regularly should expect the U.K.’s markets watchdog to come knocking. The Financial Conduct Authority on Tuesday warned regulated firms that it has powers to visit any address where work is performed and that includes private residences. The FCA could visit a home for ongoing supervision, not just as part of an investigation, the watchdog said. The updates come as staff across the financial services sector move to a hybrid working model. The FCA said firms will now need to prove that remote working arrangements don’t increase the risk of financial crime or hurt competition.
Brief: The divide between Asia’s two main financial hubs in handling the pandemic is growing ever wider, with one opening up to global travel and the other maintaining one of the world’s harshest quarantine policies. In Singapore, officials are taking steps to reconnect with the global economy even as the government faces pressure to favor locals over foreigners for well-paying jobs. Speaking in a televised address over the weekend, Prime Minister Lee Hsien Loong said that Singapore can’t stay “locked down and closed off indefinitely” and residents should prepare to see “many Covid-19 cases for some time to come.” Hong Kong Chief Executive Carrie Lam has taken the opposite approach, stressing in a Bloomberg Television interview Monday that even a single death would be a “major concern” as she follows China’s Covid Zero approach that tolerates no local infections.
Brief: Another COVID-19 variant; melting ice caps cause cities to sink below the water level; wars breaking out over diminishing supplies of potable water. Cyberattacks bankrupting global corporations and crippling governments. Corrupt autocrats plundering their countries for wealth and power. They aren’t just dystopian fantasies. Some are already occurring around the world. They’ll likely only increase in the coming year and decade. Each could exert a monumental impact on our lives—and on markets. Yet the impact won’t be uniformly negative. For investors, alpha is possible amid the chaos. The trick is adopting a mindset to take advantage of the possibilities that disruption brings.
Brief: The number of UK pharmacy M&A transactions has jumped 26 per cent to 408 in the last year, up from 325 the year before, says UHY Hacker Young, the national accountancy group. Pharmacies were one of few sectors to benefit from a surge in customer demand during the pandemic. As one of the few designated “essential retailers”, they were also allowed to remain open throughout lockdown. Sales of PPE, along with Covid testing has opened up a whole new business lines for pharmacies. This has not only increased their appetite amongst pharmacies to acquire smaller operators but also made pharmacies a more attractive target for buyers from outside of the sector. UHY Hacker Young says both regional and national pharmacy groups are making acquisitions, including first time buyers that have not previously made acquisitions. Private equity buyers have also been showing increased interest in the sector.
Brief: The global asset management industry reached an all-time high of $114.7 trillion in assets under management in 2020, according to a McKinsey report released yesterday. That made 2020 the second-best year since the financial crisis in terms of AUM growth, according to the report. It was not just driven by performance: Net new flows of assets grew at 2.7 percent in 2020, just slightly down from 2019. “In North America, 2020 was a story of the updraft in the U.S. markets in particular, in large part because U.S. media, technology, and healthcare companies were overrepresented in the circle of winners of the global pandemic economy,” McKinsey said in the report. Yet even as assets surged, asset manager revenues and operating profits have grown at a slower pace. In North America, AUM grew at 13 percent last year, while revenues and operating profits grew at 7 percent and 9 percent, respectively. McKinsey pointed out that despite the market shocks and the prolonged suspension of in-person interactions caused by Covid-19, the asset management industry has picked up some tailwinds as the U.S. economy quickly recovered to the pre-pandemic level.
Brief: With traditional equity and credit returns set for a squeeze, and ESG, Covid-19 and remote working upending the hedge fund industry from both an investment and operations perspective, managers face both considerable challenges and sizable opportunities up ahead, speakers at EisnerAmper’s 6th annual Alternative Investment Summit said this week. Opening this year’s event, the ‘Future of Hedge Funds’ panel explored an assortment of industry themes and trends – including the increased importance of ESG considerations, the far-reaching operational changes stemming from the Covid-19 pandemic, and the range of emerging investment opportunities coming down the pipeline. Simon Fludgate, head of operational due diligence of Aksia, described a “cataclysmic shift” in how much investors care about ESG, but observed how different people want different things from ESG policies, acknowledging a contrast between sentiments in US and Europe.
Brief: Allianz has unveiled the twelfth edition of its ‘Global Wealth Report', which puts the asset and debt situation of households in almost 60 countries under the microscope to reveal a sizeable growth in financial assets over the last year. 2020 was the year of extreme contrasts. Covid-19 destroyed millions of lives and livelihoods and the world economy plunged into its deepest recession since World War II. At the same time, monetary and fiscal policy mobilized unimagined sums to support the economy, markets and people. Incomes were stabilised and stock markets recovered quickly. With this tailwind, households' wealth weathered the Covid-19 crisis: Global gross financial assets increased by 9.7% in 2020, reaching the magic EUR 200 trillion mark for the first time. Savings were the main driver: As lockdowns drastically reduced consumption opportunities, the global phenomenon of "forced savings" was born. Fresh savings jumped by 78% to EUR 5.2 trillion in 2020, an absolute record. Inflows into bank deposits - the default option of forced savings, simply leaving unspent income in the bank account - almost tripled (+187%).
Brief: Facebook Inc. shares rose on Friday, though not by enough to prevent what is set to be the social-media company’s longest streak of weekly losses since the pandemic started. The stock climbed 0.5% today, but remains down 3.6% for the week. Should the stock end the week in negative territory, that would mark its fourth straight weekly loss, the longest such streak since a five-week decline that ended in March 2020. At current levels, Facebook shares are down more than 13% off a September peak. Over the past month, the stock is down 12%, making it the weakest performer among Wall Street’s biggest names. Recent losses reflect a rise in Treasury yields, which have broadly weighed on growth stocks, along with a number of company-specific headwinds. This week saw a lengthy global outage of the company’s sites, along with Senate testimony from a former insider turned whistle-blower, who argued that Facebook puts profits ahead of user safety.
Brief: Money is flowing heavily into the business of medical billing as hospitals and doctors — whose revenues were disrupted by the coronavirus — focus on maximizing every dollar they can collect from patients and insurers. The big picture: The rise and even existence of the billing industry is the result of a fragmented system that is designed around multiple types of insurance plans and a system that has increasingly forced patients to shoulder more of the costs of their care. The state of play: Companies involved with billing and collections, called "revenue cycle management" in industry jargon, increasingly advertise themselves to health care providers as one-stop shops for all things involving payments. Driving the news: The pandemic drastically shrank revenue among hospitals and other providers, and although that drop was relatively short-lived, it spurred even more revenue cycle activity.
Brief: The World Bank has revised upward its economic growth projections for the Middle East and North Africa to 2.8% this year from an earlier estimate of 2.2%, as vaccine campaigns gather pace and pandemic restrictions ease. The Washington-based lender now calculates the total cost of the pandemic at around $200 billion in terms of gross domestic product losses, according to its latest regional economic review published on Thursday. Growth in 2021 will still lag behind pre-pandemic levels and is seen at 4.2% next year, as some countries have been slower to address the public health crisis. The Middle East and North Africa was hit hard by the coronavirus pandemic last year and, like the rest of the world, lockdown measures introduced to combat the spread of the virus left many of its economies in distress. Going forward, governments must ensure efficient vaccination campaigns to prevent public health from deteriorating once again, the report said.
Brief: Governments should start planning a return to more sustainable budgets with policies that win the trust of investors, after unprecedented fiscal stimulus to fight the COVID-19 pandemic, the International Monetary Fund said on Thursday. But each country must determine the appropriate timing and pace of fiscal consolidation based on its own individual circumstances, the IMF said in its Fiscal Monitor report. The fiscal plans needed to consider the stage of the pandemic, existing fiscal vulnerabilities, the risk of economic scarring, pressures from aging populations, development needs and historical difficulties in collecting revenues. "There are countries where the pandemic is still raging and therefore the priority continues to be the health emergency," IMF deputy fiscal affairs director Paulo Mauro told Reuters in an interview.
Brief: UK-based investors are losing faith in the Government’s ability to rebuild the economy following the pandemic, HYCM research has found. The survey of nearly 1,500 investors with investments of more than £20,000 excluding property, savings and workplace pensions, found that 60% do not believe Prime Minister Boris Johnson and the Conservative Government have handled the pandemic properly. An additional 59% said they lack faith in the government's ability to tackle the record levels of public debt that was accrued during the coronavirus pandemic, while half of UK investors said they are concerned about the potential of acute economic austerity over the coming years. "As recent policy reforms would suggest, the government is already taking significant action to repay the large level of public debt accumulated during the pandemic.
Brief: The ways people work are changing, and some asset management executives are worried the industry won’t be able to keep up. Asset management executives surveyed by Accenture expressed concerns around changes in technology and permanent adoption of remote work. For instance, 68 percent of respondents answered “yes” when asked if they believed their firm’s culture is resistant to adopt new technologies. The survey, which included 100 c-suite asset management executives, is expected to be released Thursday. Respondents were largely based in the U.S. and included a range of positions, including chief information officers, chief operating officers, and chief technology officers. Firm types included asset management subsidiaries, alternative asset managers, and standalone asset managers.
Brief: Bank of America Corp will pay out $200 awards to its employees at Merrill Lynch Wealth Management who have been fully vaccinated and going to office regularly, according to a memo shared with Reuters on Wednesday. The awards will be offered to client associates, administrative support and operations staff at BofA-owned Merrill Lynch, a spokesperson for the bank said. For now, only those staffers who have confirmed they have received their vaccines were asked to return to office, the spokesperson said. “While there is no vaccine mandate across the company, we strongly recommend employees be vaccinated and to notify us of their status.” More than 80% of Merrill employees have voluntarily reported their vaccination status and have or are returning to the office, the spokesperson added.
Brief: An overwhelming majority (93 per cent) of private equity fund managers expect to make an investment in the energy sector over the coming five years as they seek to capitalise on the post-pandemic rebound in global demand for power and government-backed stimulus programmes. Of these, over half (51 per cent), stated they were ‘extremely likely’ to invest in energy. The findings are revealed in a new study, Recovery to Rediscovery: Capitalising on a Changed Private Equity Landscape, which was commissioned by Auxadi, a leading provider of accounting, tax and payroll services to private equity, real estate, and multinationals. It was based on interviews with senior-level private equity investors with average assets under management of EUR14.4 billion.
Brief: While inflation concerns mount for the U.S. economy, the real danger may be the combination of rising prices and a stagnating economy, said Bridgewater Associates co-Chief Investment Officer Greg Jensen. “The problem is stagflation -- that’s the real risk, and so many portfolios are massively exposed,” Jensen said Wednesday at the Bloomberg Invest virtual conference. Policymakers have limited options to handle that, Jensen said in an interview with Stephanie Flanders of Bloomberg Economics. “The Fed faces certainly the problem of inflation being well above their target and the inability to be as easy as they’d like to be and being pulled along by that -- and certainly the increasing odds that we’re facing bubbles,” he said.
Brief: European companies are discussing relocating staff from Hong Kong, the region’s local chamber of commerce said, as the city commits to a “Covid Zero” strategy that almost every country apart from China is abandoning. Hong Kong’s strict quarantine measures have led many businesses to consider restructuring at least part of their operations to places such as Singapore, Frederik Gollob, chairman of the European Chamber of Commerce in Hong Kong, said Wednesday on Bloomberg Television.“You can assume that in most boardrooms across Europe and Hong Kong this is a subject of discussion,” he said. “You can’t really avoid it, looking at the restrictions. “His comments come a day after Chief Executive Carrie Lam said Hong Kong’s ties with mainland China were more important than the international business and global travel connections that helped cement the city’s status as an Asian financial center.
Brief: Pick a direction, and don’t go with it. That’s the story in stocks of late, with the S&P 500 alternating between gains and losses of at least 1% for four straight sessions -- the longest stretch since June 2020. It’s the same in fixed income, with 10-year Treasury yields swinging wildly around 1.5%. The harrowing reversals reflect a particularly stark divide between bull and bear cases in markets right now. On one side, risk appetites are being constricted by lingering uncertainty over the government debt ceiling, tightening Federal Reserve policy and disrupted supply chains. At the same time, sentiment is being buttressed by improving Covid trends, an economy that keeps chugging along and forecasts for more double-digit earnings growth from corporate America.
Brief: RBC Capital Markets downgraded its rating on Air Canada to the equivalent of hold from buy, citing a “heightened risk” that COVID-19 variants will cap the stock’s near-term performance.“The [Delta] variant has undoubtedly impacted the pace of the recovery while also adding a layer of uncertainty regarding the timing of the industry’s ‘return to normal,’” Walter Spracklin and Ryall Stroud, analysts at RBC, wrote, arguing investors should prepare for a more stubborn recovery that stays “lower for longer.” Tuesday’s downgrade represents the first time the bank’s analysts have lowered Air Canada’s stock rating since 2013. Their outperform rating remained untouched through the thick of the pandemic, as the airline slashed capacity and global travel collapsed. But new data indicates the recovery will be “choppier” and longer than previously assumed, Spracklin and Stroud wrote.
Brief: Generation X, the oft-overlooked demographic group squeezed between the Baby Boomers and Millennials, has experienced a wealth boom in the U.S. since Covid-19 was declared a national emergency. During the pandemic, household wealth distribution has shifted from older generations to those who are reaching their peak earnings years, according to data from the Federal Reserve. Gen Xers, who are age 41 to 56, saw robust gains in equities and pension entitlements, while their share of the nation’s consumer debt declined, the data show. The Covid-19 crisis marks a rebound of sorts for the cohort that was worst-hit by the 2008 financial crisis. Millions of Gen Xers, who were in their 30s and early 40s at the time, lost jobs and housing wealth.
Brief: Employees just starting out are risking their career advancement by continuing to work remotely, hedge fund manager Ken Griffin said. “If you are early in your career, you are making a grave mistake not being back at work,” Griffin said Monday in a conversation with Bloomberg’s Erik Schatzker at the Economic Club of Chicago. “It’s incredibly difficult to have the managerial experiences and interpersonal experiences that you need to have to take your career forward in a work-remotely environment.” Griffin, who runs Citadel’s hedge fund business and Citadel Securities, also said working outside the office hinders innovation and indicated it may hurt the country’s competitiveness. Workers in China have returned “literally from almost the start” of the pandemic, he said.
Brief: JPMorgan Chase & Co said on Monday it will restrict business travel for U.S. employees who are unvaccinated or have not disclosed their vaccination status to the bank, according to an internal memo seen by Reuters. The bank has also mandated such staffers to be tested twice a week, and said they would need to contribute a higher cut of their pay towards medical insurance, to account for testing expenses. The Wall Street bank has urged its employees to get their COVID-19 shots, but not mandated vaccines, in line with peers such as Bank of America Corp and Wells Fargo & Co. JPMorgan Chase will also require proof of vaccination from employees participating in client events in-person, effective immediately, according to the memo.
Brief: India’s digital economy is poised to mirror China’s, and is expected to be worth a staggering $1 trillion in the next five to six years. According to a white paper by Investcorp, expected to be released Monday, India’s digital advancement has further accelerated amid the pandemic as consumers relied on technology to meet everyday needs — from purchasing groceries and other essentials to accessing education and healthcare services. In a country that has been one of the hardest-hit by the pandemic, 11 new unicorns (private tech companies with a valuation of at least $1 billion) were created in 2020 — the equivalent of the previous three years combined. In the first half of 2021, India boasted 15 new unicorns, which raised a total of $6 billion at an aggregate valuation of $28 billion. Investcorp now estimates that 100 new unicorns will be created in the country by 2025.
Brief: It has been an eventful time for petrol stations across the UK. Panic buying of fuel has seen demand overwhelm supply. More broadly, the huge pent-up savings from the pandemic has seen a significant demand surge for goods. While global manufacturing continues to supply goods at a record pace, supply chains have not been able to keep up - from used cars, semiconductors and furniture, to Nandos' chicken. This has been further exacerbated by global capital expenditure (capex) levels having slumped in recent years. Capex levels have not kept pace with depreciation since 2017, and the pandemic unsurprisingly caused a further depression in capital spending. The MSCI AC World Capex to depreciation ratio (ex-financials) dropped to around one in 2020, indicating companies in recent years have mostly been spending on maintenance - investing ‘for balance sheet rather than for growth'.
Brief: Chancellor of the Exchequer Rishi Sunak may be touting a recovery in the U.K.’s job market, but his latest spending pledge shows he’s still concerned about a spike in unemployment now his furlough plan has ended, according to Goldman Sachs Group Inc.In a speech to the Conservative Party Conference on Monday, Sunak heralded the performance of the U.K.’s labor market during the pandemic, and announced 500 million pounds ($680 million) of funding to help get people back to work after the expiry of the wage-support program. For Goldman economists, that extra spending, while low compared with the billions spent on furlough, is a sign the Chancellor is still harboring concerns about the outlook for the labor market even as he insists it was right to end the support in September.
Brief: U.S. Supreme Court justices are set to don their black robes and sit once more behind a mahogany bench in their grand courtroom on Monday as they resume in-person oral arguments for the first time since COVID-19 pandemic disruptions started last year. In a tentative step toward normalcy, the nine justices will be joined by lawyers, court staff and journalists in their spacious column-lined courtroom as they begin their new nine-month term. No members of the public will be present. The court building has been closed to the public since March 2020 due to the pandemic, with the justices hearing oral arguments via teleconference. In a sign of how planning during the pandemic is constantly in flux, preparations for the new term were disrupted on Friday when Justice Brett Kavanaugh tested positive.
Brief: New Zealand’s central bank is expected to embark on a series of interest-rate increases to tame inflation and rein in soaring house prices, even as a coronavirus outbreak that has now spread beyond Auckland poses a greater risk to economic growth. Reserve Bank policy makers will raise the official cash rate by a quarter percentage point to 0.5% Wednesday in Wellington, according to 20 of 21 economists in a Bloomberg survey. Most predict it will follow up with a succession of hikes over the coming year, taking the rate to around 1.5% by August 2022, though the persisting outbreak of the highly infectious delta strain of Covid-19 could interrupt the tightening cycle. “We expect the RBNZ to go ahead with hiking the OCR on Wednesday, while noting downside risks to the outlook,” said Sharon Zollner, chief New Zealand economist at ANZ Bank in Auckland. “There’s no question that the situation is grimmer than we were all assuming back in August. We thought we were looking at a relatively short, successful lockdown and then we would be Covid-free, and that’s not likely at all any more.”
Brief: Deals by real estate investment trusts totaled $108 billion this year through September, beating the annual record as ample capital fueled transactions in the recovering economy, according to Jones Lang LaSalle Inc. The U.S. deal surge signals the beginning of a new cycle emerging from the pandemic-related economic halt, according to Sheheryar Hafeez, a managing director in the capital markets group at JLL. “There is renewed confidence in the runway ahead of us in 2022 and beyond,” said Hafeez, whose company released a report on REIT transactions Monday.REIT mergers and acquisitions had plunged to $17 billion last year. Even before the pandemic, deals were slowing from the recent high of $86 billion in 2018 as investors worried about the decade-plus bull market coming to an end, according to Hafeez. The all-time high was $103 billion in 2006.
Brief: Airline losses from the coronavirus pandemic are set to surpass $200 billion as travel curbs weigh on corporate and long-haul demand well into 2022, according to the industry’s main lobby. Carriers are poised to post a collective deficit of $11.6 billion next year, the International Air Transport Association said Monday in Boston at its annual meeting. The trade body also increased its loss estimate for this year, and revised upward the shortfall for 2020. The combined $201 billion in net losses over the pandemic-blighted period eclipses close to nine years of industry earnings, based on IATA figures. While domestic and regional travel have begun to rebound, there’s been little recovery in the globe-spanning business routes so crucial to many carriers. The U.S. is poised to open its borders to trans-Atlantic visitors next month, but other long-haul markets remain in the doldrums, especially those connecting Asia with Europe and North America.
Brief: For the world’s leading Covid-19 vaccine makers, news that Merck & Co.’s experimental pill cuts the risk of hospitalization and death in half was the latest blow in a very bad week. Stocks including Moderna Inc. and BioNTech SE have shed about $84 billion in combined value this week in the aftermath of a stock market slump that sent the two companies to their lowest level since July. Selling accelerated on Friday, with BioNTech and Moderna each declining as much as 16% in New York as Merck delivered the news on its experimental pill that Wall Street called a “game changer.” The drug, called molnupiravir, reduced the risk of hospitalization or death by 50% in a study, raising concerns about the long-term revenues for companies providing inoculations.“
Brief: SoftBank-backed Indian hotel chain Oyo Hotels on Friday filed for a public offering, just two days after trendy eyeglass unicorn Warby Parker (WRBY) went public on the New York Stock Exchange. The flurry of activity has become commonplace during a record-breaking surge of IPOs this year that's seen buzzy offerings from the likes of Robinhood (HOOD), Coinbase (COIN), and 23andMe (ME). In a new interview, Suzanne Shank — president and CEO of investment bank Siebert Williams Shank — said the IPO boom comes down to two main factors: companies repositioning themselves during the pandemic and the persistence of low interest rates from the Federal Reserve. "I think we're seeing companies that both benefited from the pandemic, as well as those that are sort of rebooting post-pandemic," she says. "That has really been sparking this increased deal flow."
Brief: It may be no comfort for millions of workers and businesses, but the U.K.’s coronavirus recession was no longer the worst in three centuries. Revisions mean that gross domestic product fell by 9.69% in 2020. That makes it the deepest slump since 1921, when the economy shrank 9.71% in the aftermath of World War I. The decline was previously estimated at 9.85%. Until then, the devastation wrought by the pandemic was thought to have exceeded all recessions since 1709, when the Great Frost led to a 13.4% contraction. The revisions announced Thursday are part of the annual Blue Book, when the Office for National Statistics updates the national accounts based on new sources and methods. While ONS figures go back to 1948, long-run estimates are produced by the Bank of England.
Brief: Zoom’s agreement to buy cloud contact center software company Five9 was scuttled on Thursday, after Five9 shareholders rejected the deal. Zoom said in July that it was acquiring Five9 in an all-stock purchase for $14.7 billion, its first billion-dollar-plus purchase and, at the time, the second-biggest tech deal of the year. The company has now lost an opportunity to quickly broaden its capabilities after its stock rallied during the coronavirus pandemic.Five9 shares fell 2% in extended trading following the statement from the companies. Buying Five9 “presented an attractive means to bring to our customers an integrated contact center offering,” Eric Yuan, Zoom’s founder and CEO, wrote in a blog post. “That said, it was in no way foundational to the success of our platform, nor was it the only way for us to offer our customers a compelling contact center solution.”
Brief: The Covid-19 pandemic has catapulted social issues to the forefront of investors minds, according to the latest global investor study published by Schroders today (September 30).The survey of more than 23,000 people across Europe, Asia and the Americas, revealed that 57% of investors are now placing greater importance on social issues versus environmental issues (55%) compared to pre-pandemic levels. The definition of “people” in the context of the research means those who will invest at least €10,000 (or the equivalent) in the next 12 months or those who have changed their investments within the last 10 years.Whilst the environmental element of ESG investing has been firmly on the radar of global investors since the Paris Agreement, meaningfully addressing social issues – from the consistency of corporate behaviour towards employees during the pandemic to working conditions and a liveable wage – has traditionally been lacking.
Brief: Transport and health ministers of the G-7 countries are due to meet virtually on Thursday to discuss ways to restart international travel, according to people familiar with the matter. The meeting is being organized by the U.K., which holds the presidency of the Group of Seven nations this year, said the people, who asked not to be identified ahead of any official statement. It’s aimed at moving closer to a consensus on how to ease border restrictions. While some countries, notably members of the European Union, have used so-called vaccine passports to successfully resume cross-border travel, others including the U.S. have held back on implementing app-based technology over concerns ranging from politics to privacy or fairness between people who have and haven’t received the shots. Another sticking point has been whether to recognize vaccines in countries where they haven’t been approved.
Brief: The U.K. economy emerged from the winter lockdown more strongly than previously estimated, but the recovery is already running into trouble. Gross domestic product rose 5.5% in the second quarter instead of the 4.8% previously estimated, Office for National Statistics figures published Thursday show. The increase, which reflected the reopening of stores and the hospitality sector, left the economy 3.3% smaller than it was before the pandemic struck. Government spending, exports and business investment were all stronger than previously estimated by the ONS. Hopes that the shortfall might be made up this year are fading, with consumers and businesses facing the twin headwinds of accelerating inflation and supply chain problems. Bank of England Governor Andrew Bailey on Wednesday said that output is unlikely to recover its pre-pandemic level until early next year, later than officials predicted in August.
Brief: David Rogers is having a dream run at Castle Hook Partners, the $1.8 billion hedge fund backed by investors including billionaire Stan Druckenmiller. The fund is up about 120% since April 2020, according to people with knowledge of the matter, after taking a hit in the early part of last year in the pandemic’s initial selloff. It lost 10% in the first three months of 2020, said the people, asking not to be identified because the information is private. The turnaround is in sharp contrast to the fund’s modest returns since starting five years ago with about $900 million. The money included a substantial anchor investment from Druckenmiller who trained Rogers at his former hedge fund Duquesne Capital Management and once described him as an “extremely talented” money manager. Gains in 2020 were evenly split between wagers on equities, rates and foreign exchange, according to one of the people. The firm turned bullish on inflation and commodities late last year, themes that continued to drive performance in 2021, the person said.
Brief: Global mergers and acquisitions hit new record highs in the third quarter as companies and investors shaped their post-COVID future through transformative deals while their advisers struggled to cope with transaction volumes never seen before. A frantic summer of merger activity produced deals worth $1.52 trillion in the three months to Sept. 27, up 38% from the same quarter last year and more than any other quarter on record, according to Refinitiv data. Third-quarter volumes drove global M&A activity in the first nine months of 2021 to an unprecedented record of $4.33 trillion, overtaking an all-time annual peak of $4.1 trillion hit before the financial crisis in 2007 and forcing investment banks to hike pay for overworked and disgruntled junior staff.
Brief: Expectations for the behavior of institutional investors are changing. As societies around the world deal with the challenges of climate change, a global pandemic, social upheaval and other adversities, institutional investors are being asked to take a much more expansive view of risk than many traditional investment models currently account for. Increasingly, this includes optimizing their investments and overall portfolio for environmental, social and governance (ESG) impact. According to Nuveen’s annual survey of institutional investors, almost 70% of investors indicated that they plan to seek out more ESG-oriented alternative investments in the near term. Additionally, over 70% agree that ESG is about fully integrating environmental, social and governance factors into investment decision-making. With this holistic view, investors can pursue the stability, diversification, financial performance and positive real-world benefits that underpin long-term value growth.
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