.png?width=200&height=78&name=CH%20Diligence%20(thicker%20line).png "CH Diligence (thicker line).png")
Our briefing for Friday May 22, 2020:
May 22, 2020 3:09:47 PM
- As the United States heads into their Memorial Day long weekend, President Donald Trump has ordered states to allow places of worship to reopen from stay-at-home restrictions as of this weekend. President Trump said he would override any governor who refuses, declaring churches an “essential” service if need be under CDC guidelines. Media outlets are reporting it is unclear if President Trump has the power to override state orders to close churches or limit the size of services.
- An article from the CBC says Canada is reopening without knowing where Canadians are getting COVID-19. The article sites the country’s two largest provinces as examples that make medical experts very nervous. For instance, Ontario has seen new daily cases trend upward, testing falling below their targets, and the source of infection for new cases remaining a mystery. In Quebec, their director of public health is not satisfied with number of people being tested as it falls far below their capacity of 20,000 per day. Similar to Ontario, their latest public health data provides no clear explanation on why infection rates continue to occur months after lockdown.
- New plans from the United Kingdom will have travellers arriving in the country facing possible fines of £1,000 for violating self-isolating rules of 14 days. As part of the plan to prevent a second wave, starting June 8th, foreign nationals and British citizens arriving in the country will be told to share their contact details with the authorities. Health officials will then conduct spot checks at homes, with people breaching the rules facing fines.
- As of Monday, two of Spain’s largest cities will being phasing out of the country’s lockdown. Madrid and Barcelona citizens will be able to meet in groups of 10, travel within their provinces and bars and restaurants will be allowed to serve clients outdoors. Local city officials from both Madrid and Barcelona have been feuding with the Spanish government for two weeks to lift the lockdown measures in place.
- With the world dealing with the coronavirus pandemic, it appears China is making a play to tighten control over Hong Kong. China plans on setting up national security agencies directly in Hong Kong which critics fear will stir up tensions in the area. The move by Beijing caused the worst one-day performance of Hong Kong’s stock market in five years as there are now new concerns over the future of Asia’s financial hub.
- The Australian government found a good mistake after a revision noted that the number of Australians expected to be covered by the wage subsidy scheme is actually half of what was expected. Australia’s Treasury Department said successful efforts to control the outbreak, combined with errors on applications by about 1,000 business means only 3.5 million people need to be covered under the program at a cost of $70B. The original tally had the government on the hook for 6 million people and $130B.
Covid-19 – Due Diligence And Asset Management
Full Disclosure? Hedge Funds Navigate COVID Health Questions
Brief: As the hedge funds once clustered in London’s Mayfair negotiate gyrating markets, they are facing a new line of investor questioning: who has contracted COVID-19? With billions sometimes riding on the performance of one star manager, or a small constellation of talent, investor interest in delving into the medical status of staff — a realm considered by many private — is perhaps understandable during a pandemic. “The important thing for managers is planning – what do they intend to do on the basis of when, not if, they get the virus,” said one of three investors who told Reuters they wanted to be informed about any coronavirus infections at the hedge funds they invest with. But most of Britain’s hedge fund managers have no protocol for divulging such details and there are no specific legal requirements for them to do so, according to Samuel Brooks, a partner at law firm Macfarlanes… They say they would only tell investors if their top managers fell seriously ill, but not necessarily inform them of a mild infection, or if lower-ranking staff became sick, according to interviews.
World’s Biggest Investors Fear Second Virus Wave Will Derail Stock Rallies
Brief: Some of the world's biggest investors are worried that a second wave of coronavirus could derail the global stock market recovery, with many anxious about further lockdowns being put in place as a result. A poll of global investors, which manage more than $17tn collectively, found that 70% of hedge funds and long-only investors are “somewhat worried” or “very worried” about another outbreak of the disease, which has so far killed more than 320,000 globally and caused near economic paralysis. Respondents to the survey, conducted by online opinion sharing platform Procensus, also put a 34% probability on their region entering full lockdown again. The poll found that 34% are now prioritising data signals on infection rates and a second wave of Covid-19 cases, over news of a vaccine being developed. More than 30% of investors said they do not expect a vaccine to be ready on a global scale until 2022 at the earliest. However, others are more optimistic with 22% expecting a vaccine will be available by the second quarter of 2021.
Bored Day Traders Locked at Home Are Now Obsessed with Options
Brief: Forget buy-and hold. Stuck at home and dreaming of a killing, bored retail traders are branching out into all manner of Wall Street exotica. Darting in and out of stock options, dabbling in complicated exchange-traded funds, devouring trading how-to books by the dozen -- all have become tools in the self-directed portfolio playbook. Locked down and socially distant with lots of time and (apparently) money to spare, they’re leveraging zero-percent brokerage fees in new and surprising ways. Big shock: Wall Street says it will end badly. “Obviously you’re exposing yourself, depending on how you’re doing it, to catastrophic loss,” said Brian Nick, chief investment strategist at Nuveen. “If you get a lot of investors in either individual securities, companies or investment strategies that they may not have experience with, it could lead to unhappy investors down the road.” Whatever the advisability, individual investors have been a rising force in the $6 trillion stock rebound. Contrary to old-school theories that mom and pop bail at times of market crisis, they piled in this year, lured by free trading and, probably, boredom, with casinos closed and sports betting halted.
Hedge Funds Increased Exposure to Growth Favorites in First Quarter: Goldman
Brief: Hedge funds concentrated their portfolios even further into growth stocks including Amazon.com Inc (AMZN.O) and Microsoft Corp (MSFT.O) in the first quarter of 2020 as the COVID-19 pandemic pummeled U.S. markets, Goldman Sachs analysts said in a report. The two American multinationals saw the largest increase in hedge fund holdings, according to an analysis by the bank of 822 funds with 1.8 trillion in gross equity positions. Along with Facebook Inc (FB.O), Alphabet Inc’s Google (GOOGL.O) and China’s Alibaba (BABA.N), they have been hedge funds’ top five long positions for seven consecutive quarters, the report said. Goldman Sachs said the focus on growth stocks, which tend to outperform the overall market, had supported recent hedge fund performance as Wall Street witnessed one of the quickest turns to a bear market amid a near-collapse in business activity.
Invesco FX Manager Goes Long on Risk Despite Data ‘Cratering’
Brief: As the global economy contends with the biggest growth slowdown in decades, an Invesco fund manager has flipped his positions. Alessio de Longis, a New York-based fund manager at the $1.3 billion Invesco Oppenheimer Global Allocation Fund, said he is now underweight traditional haven currencies -- including the yen and the Swiss franc -- which are overvalued relative to their peers. He’s considering adding more exposure to the euro, Canadian dollar, Swedish krona and Norwegian krone since those are likely to carry more upside potential when growth prospects pick up. These currencies may get a boost as central banks and governments globally unleash billions of dollars in stimulus and rate cuts to counteract the crisis. Even though the outlook is grim at the moment, de Longis believes much of the current economic gloom has already been priced in.
Apps to Book Elevator Rides, Masks and Staggered Shifts: Toronto Bankers get Glimpse of New Office Normal
Brief: Elevator queues, mandatory masks and staggered start times may await Toronto’s office workers when they start venturing back to North America’s second-largest financial centre. These are among the measures Cadillac Fairview Corp. Ltd. is pursuing as the commercial property firm prepares for a “measured” return of workers to downtown buildings. The company is landlord to some of Canada’s largest banks as the owner of office towers such as TD Centre and RBC Centre. “It’s going to be a gradual but steady climb back to normalcy,” Sal Iacono, Cadillac Fairview’s executive vice-president of operations, said in an interview. Ontario has been easing restrictions on business as the COVID-19 pandemic, which has killed nearly 2,000 people in the province, finally eases. Office workers should brace for dramatic changes, with numerous precautions to protect them and the public. Cadillac Fairview, owned by the Ontario Teachers’ Pension Plan which oversees 70 properties in Canada including the Toronto Eaton Centre shopping mall, is just one of the city’s large landlords adopting new measures to make returning to work safe.
