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Our briefing for Friday April 30, 2021:
Apr 30, 2021 4:21:01 PM
- In the United States, one day after New York City announced their plans to fully reopen by July 1st, the Centers for Disease Control and Prevention (CDC) have cautiously seconded that plan, stating it’s a “reasonable target” given falling cases and rising vaccination rates. “We are focused on getting people vaccinated, decreasing the case rates,” CDC Director Dr. Rochelle Walensky said in a COVID-19 press briefing. “If we can continue at this pace, case rates are coming down, vaccinations going up, then I think July one would be a reasonable target.” The White House is likely to announce a vaccine milestone on Friday: 100 million adult Americans fully vaccinated.
- Statistics Canada released their latest data on Friday announcing the economy expanded at a 6.5% pace in the first three months of 2021. The data puts Canada on track for healthy growth for the quarter as a whole and was on pace with the United States’ 6.4% growth announced on Thursday. The numbers caught some economists by surprise. “So, even with much more forceful restrictions, a slower vaccine roll-out, and without the help of the two mega U.S. stimulus packages at the start of the year, somehow the Canadian economy matched the U.S. step for step through the winter months. That is impressive,” said Bank of Montreal economist Doug Porter.
- In the United Kingdom, The Guardian is reporting the government is reducing funding to vital coronavirus research, including a project, tracking variants in India as much as 70%. UK academics were noting the cuts were removing funding from the existing projects that were helping to support sequencing in other parts of the world. A COVID-19 surveillance project in Brazil, which was tracking variants in that country was also affected by the cuts. The Guardian stated a report from the all-parliamentary group on COVID will call for a reversal of coronavirus-related aid cuts on Monday.
- In France, President Emmanuel Macron outlined the phasing out of coronavirus restrictions for the country on Thursday. Similar to the UK, France will have four phases of their reopening with the first starting on May 3rd and the final phase, if all goes well, on June 30th. Some of the phases though will come with conditions. For instance, the reopening of borders to foreign tourists starting June 9th will only be possible with a health pass attesting that the holder has either been vaccinated, has recently tested negative for the virus, or has recently recovered from it. France has been under its third national lockdown since April 3rd with current restrictions including a 7 pm nighttime curfew, a ban on travelling further than 10 KM (6 miles approximately) away from home, and the closure of all non-essential businesses.
- The government of Japan is busy doing some damage control after the European Union (EU) confirmed earlier in the week that the bloc approved the export of more than 50 million COVID-19 vaccines to the country; the most among nations the EU is shipping to. Japan’s vaccination rollout has been slow, and its citizens are growing frustrated, especially after government officials have cited supply bottlenecks as one of the reasons for the slow rollout. Being number one on the EU’s export list would seem to directly contradict this notion. Therefore, Vaccines Minister Taro Kono took to social media tweeting that the numbers the EU provided were wrong. There had only been 28 million Pfizer doses shipped from the EU, while Chief Cabinet Secretariat Katsunobu Kato said Moderna vaccines were included in the shipment, which hasn’t been approved for domestic use – but failed to give details on how many doses of Moderna were received.
- The Australian government is considering on taking the extraordinary measure of making it a criminal offense for Australians who return home from COVID-19 hotspots overseas. Prime Minister Scott Morrison’s government is contemplating the move after media reported two Australian cricketers circumvented the direct flight ban from India, by flying from India to Qatar, and then flying home. Biosecurity regulations, invoked during the pandemic, have already given government authorities sweeping powers. For instance, as of right now, authorities can require an individual to provide contact details, regularly update an officer on their health status and restrict movement by remaining at an individual’s place of residence for a specified period, just to name a few.
Covid-19 – Due Diligence And Asset Management
Lazard CEO says He’s Looking to Hire New Hedge Fund Teams
Brief : Lazard Ltd. Chief Executive Officer Ken Jacobs is looking to take advantage of disruptions in the market by acquiring hedge fund teams and long-only investor groups. “We see a lot of opportunity there,” Jacobs said Friday in a telephone interview after his firm reported first-quarter results. The CEO said he sees a chance to gain in the alternatives business “by consolidating some of the smaller teams that are out there.” Lazard’s assets under management jumped 37% in the first quarter from a year earlier, to $265 billion, driven by a rebound in the markets, according to a statement. The firm generates about half its revenue from managing money and the rest from providing financial advice on mergers, acquisitions and restructurings. Jacobs said Lazard has been adding at least one investment group each quarter, while also actively hiring more M&A dealmakers at the senior level. Dealmaking is also rebounding, he said. As for large acquisitions in asset management, “we really like our position in our business today,” he said. “I’d never say never to anything, we’re inherently, at our core, dealmakers.” Lazard gained 9.8% this year through Thursday, compared with a 12% rise in the S&P 500.
Europe’s Economy Shrinks in First Quarter as US Rolls Ahead
Brief: Europe's economy shrank 0.6% in the first three months of the year as slow vaccine rollouts and extended lockdowns delayed a hoped-for recovery - and underlined how the region is lagging other major economies in rebounding from the coronavirus pandemic. The fall in output for the 19 countries that use the euro currency was smaller than the 1% contraction expected by economists but still far short of the rebound underway in the United States and China, two other pillars of the global economy. Figures announced Thursday showed the U.S. economy grew 1.6% during the first quarter, with business supported by strong consumer demand. On an annualized basis, the U.S. grew 6.4%. In Europe, it was the second straight quarter of falling output, meaning the region fell back into a recession despite a rebound in growth from July to September of last year. The latest data covers the quarter that ended March 31 and economists say the economy is on the verge of an upswing. France showed unexpected growth of 0.4% compared to the quarter before, while the main negative surprise came in Germany, the continent's largest economy.
Strong Economy Amid Pandemic Masked by 1-Point Hike in Funding
Brief: Despite a 71-basis-point drop in the average discount rate contributing to a 7.7% rise in aggregate liabilities, Pensions & Investments' annual analysis of SEC filings showed a 1-percentage-point increase in the average funding ratio of the 100 largest U.S. corporate defined benefit plans in 2020. "If you didn't know what happened in between, you wouldn't have seen too much change year-over-year from 2019 to 2020, with funded status ending right around where it started. But a lot did happen," said Tom Meyers, executive director and head of Americas client solutions at Aviva InvestorsAmericas LLC in Chicago. As of March 31, 2020, Wilshire Consulting estimated the aggregate funding level of S&P 500 company-sponsored pension plans at 79.2%, a 9.4-percentage-point decrease from the end of 2019. However, the aggregate funding ratio of P&I's universe was 88.4% as of Dec. 31, which Mr. Meyers said "reflects the magnitude of the capital markets recovery." The average funding ratio of the 100 largest plans was 92%, up from 91% the year before. As plans recovered from the drop in funded status and the market dislocations that followed the onset of the pandemic last spring, Mr. Meyers said well-positioned plans made opportunistic moves, such as selling Treasuries to increase corporate bond exposures at higher spreads and investing in alternative asset classes like commercial real estate, private credit or high yield that were under pressure during the crisis.
Fueling Endless Rally is Raft of Real-Time Reopening Data
Brief: Amusement parks tickets. Business-class plane reservations. Drive-thru traffic at McDonald’s. Now more than ever, investors are leaning on real-time data to buttress their bullishness on the U.S. stock market. They’re sifting through an ever-widening array of snapshots at a time when some government figures are being distorted by year-ago comparisons to an economy hobbled by a recession. Of course, no one needs esoteric datasets to see that the U.S. -- once the epicenter of the pandemic -- is on the mend, notes Paul Hickey, co-founder of Bespoke Investment Group. Deaths are down, vaccinations are up and consumers are spending again. But with the snap-back recovery in the books and stocks perched at the highest valuations in two decades, the hunt is on for indicators to fine-tune the bull case -- or uncover an early warning signal to get out before being blindsided by a crash. The following is a rundown of what market pros say they’re watching.
ASIC Review Finds Retail Managed Funds Responded Well to COVID-19 Challenges in 2020
Brief: An ASIC review of a targeted selection of retail managed funds found that they did not face serious investor liquidity challenges during the height of COVID-19 market disruption, and that their liquidity frameworks were generally adequate. While there was a significant drop in net investor cashflow in the first half of 2020, responsible entities of these funds did not tighten members’ ability to withdraw their investments. ASIC conducted the review between June and November 2020 to identify any potential liquidity issues faced by managed funds and respond to those if necessary. The review covered 14 registered funds across three different strategies (four mortgage, five direct property and five fixed income funds) with an aggregate of $1.7 billion in assets under management and approximately 8,500 investors. ASIC selected funds that it considered were at risk of facing liquidity issues due to a mismatch between investors’ expectations or potential desire to exit and the liquidity of the fund assets in a financially stressed market.
US Equity and IPO Capital Markets Raise Record-Breaking USD125bn from 389 IPOs in Q1 2021
Brief: IPO activity in the US had the strongest first quarter in the year 2021, continuing the strong momentum seen in the second half of the year. According to the research data analysed and published by Finaria, 389 US-based IPOs raised a total of USD125 billion in Q1 2021, up from the 33 issuances that raised USD10 billion in Q1 2020. From this total, there were 298 SPAC deals raising a collective USD87 billion. That was higher than the amount raised in the whole of 2020. On the global landscape, proceeds from traditional IPOs set a five-year record. Based on a report by KPMG, 458 issuances raised USD96 billion in the period which ended on 24 March, 2021. That was up from 252 deals that raised USD30 billion in Q1 2020. US, Hong Kong and A-Share Markets Lead with USD61.4 Billion from Traditional IPOs, 63 per cent of Global Total In the US, the total number of SPACs in Q1 2021 was thrice the figure posted in Q3 2020, which was when the trend became popular. In Q1 2021, there were only 91 traditional IPOs in the country, raising USD38 billion. For the 24 SPACs that completed mergers during the quarter, there was a 27 per cent return. Traditional IPOs, on the other hand, had a 15 per cent return while key indices, S&P 500 and NASDAQ gained 6 per cent and 3 per cent, respectively.
