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Our briefing for Friday May 8, 2020:
May 8, 2020 3:50:16 PM
- The United States Department of Labor confirmed what many already feared: April 2020 was by far the most sudden and largest decline of jobs since the government began tracking data in 1939. The American economy lost 20.5 million jobs last month, and the unemployment rate soared to 14.7%. The last time unemployment numbers were that high was during the Great Depression when it peaked at 24.9% in 1933.
- North of the border in Canada, the numbers were not much better. Statistics Canada noted two million jobs were lost in April, causing the unemployment rate to spike to 13%, compared to 7.8% in March. Since comparable data started being recorded in 1976, the April unemployment rate was the second highest on record. December 1982 remains the highest at 13.1%. The province of Quebec has the highest unemployment rate among all provinces at 17%, and unfortunately it won’t get much better for the time being. This is due to Montreal’s planned reopening being pushed back for the second time. Elementary schools, daycares and retail stores that have entrances to outside streets will have to wait until May 25th to possibly reopen.
- As United Kingdom citizens eagerly await to see what Prime Minister Boris Johnson’s Sunday news conference has in store for the country, government officials seem to be making sure people temper their expectations. The country’s environment and culture secretaries warned there will be no dramatic overnight change to its lockdown restrictions once next week rolls around. The UK is closing in on 212,000 cases and has 31,000+ deaths due to the coronavirus.
- The mayor of Milan, Italy made an angry television appearance on Friday threatening to pass measures of shutting down the city once again. Mayor Giuseppe Sala called television footage “disgraceful” as it showed crowds of people gathering in open spaces of the city and apparently ignoring public health rules aimed at preventing a second wave of the virus. Italy only loosened some of Europe’s toughest restrictions on Monday May 4th. “Either things change today, or tomorrow I’ll be here in Palazzo Marino and I’ll pass measure to close the Navigli, I’ll stop takeaway services and then you can explain to the people who work in bars why the mayor isn’t allowing them to do business,” said Sala.
- As promised, Australia’s Prime Minister Scott Morrison unveiled his government’s plan to emerge from the coronavirus pandemic. Prime Minister Morrison announced a three-step plan to reopen the country’s economy by July. The first stage includes family and friends allowed to visit each other while restaurants, stores and cafes can reopen. The second stage will allow larger gatherings of up to 20 people, while organized community sporting events and beauty parlors can resume operations. The final stage will allow gatherings of 100 people and interstate travel will be permitted to resume.
Covid-19 – Due Diligence And Asset Management
Credit Funds in India see Big Outflows on Franklin Mutual Stock
Brief: Indian credit risk funds suffered large redemptions in April after Franklin Templeton’s shock decision to wind up $4.1 billion of such plans triggered fresh turbulence in the nation’s debt market. The category saw a net withdrawals of 192 billion rupees ($2.5 billion) last month, up from outflows of 55.7 billion rupees in March, according to data released Friday by the Association of Mutual Funds in India. “The Franklin event intensified redemptions in credit funds that we saw in March,” said Vidya Bala, head of research and co-founder at Chennai-based Primeinvestor.in. “There’s a clear flight to safety as flows to gilt funds have jumped and a good chunk would have moved to deposits.” Equity funds received a net 62.1 billion rupees, the smallest inflow this year, as the world’s most expansive lockdown to curb the spread of coronavirus infections stalled economic activity and disrupted processes at mutual funds and their distributors.
Macquarie Group Ready to Invest, Despite Crisis
Brief: Macquarie Group chief executive Shemara Wikramanayake has signalled the bank could pounce on assets that come up for sale in the pandemic crisis, after slashing dividends and warning of a highly uncertain outlook. As the banking group on Friday delivered an 8 per cent slide in profit to $2.7 billion, it also highlighted a strong balance sheet and $20 billion in "dry powder" for investment by its infrastructure-focused managed funds. Markets cheered the result, with Macquarie shares gaining 5.7 per cent to $105.19 amid predictions the bank would emerge from the crisis in relatively good shape, despite taking a short-term hit. The company known as the "Millionaires' Factory" on Friday also released its remuneration report for the financial year, which showed Ms Wikramanayake was awarded $18.1 million for the year, her first full 12 months as CEO, up from $17 million last year. She was not the highest paid senior executive at Macquarie, with head of Macquarie Asset Management Martin Stanley awarded $18.9 million for the year after a surge in profit in his division.
A Swedish Real Estate Mogul Has His Bond Investors Very Worried
Brief: Bondholders in one of Sweden’s biggest property firms say they fear their investment might soon be labeled junk after learning of a criminal probe with wide-reaching ramifications. The company in question is Samhallsbyggnadsbolaget i Norden AB, also known as SBB. Its chief executive, Ilija Batljan, was this week detained by police for questioning amid reports of insider trading tied to a recent acquisition. The news sent SBB’s share price and bonds plunging. The episode has struck a nerve in a market already shaken by panic selling. Back in March, 35 credit funds slammed shut to halt a client exodus as the bond market tanked. Real estate bonds played a big role in the rout, and the financial watchdog has since signaled concern over the sector’s dominance in credit markets, following its conspicuous growth.
Brookfield to Create $5 Billion Retail Revitalization Program
Brief: Brookfield Asset Management Inc. (“Brookfield”) (TSX: BAM.A, NYSE: BAM) today announced the launch of a Retail Revitalization Program (“the Program”) to bring much needed capital and assist with the recapitalization of retail businesses with operations in the major markets in which Brookfield operates globally. The Program, which will be funded by Brookfield and its institutional partners, will focus on non-control investments in retail businesses to assist with their capital needs during this period of dislocation. Brookfield is targeting $5 billion to be put toward this Program. This Program will be led by Ron Bloom, Managing Partner and Vice Chairman of Brookfield’s Private Equity Group, who was a principal architect of the restructuring and rejuvenation of the automobile industry on behalf of the U.S. government during the 2008 financial crisis. “This initiative is being designed to assist medium sized enterprises in getting back on their feet. We believe this is a critical component to getting the economy moving again, and we would like to partner with companies and entrepreneurs that can draw on our capital and expertise to stabilize and grow their business,” stated Bloom.
The Pandemic is Transforming the Wealth Management Industry, UBS says
Brief: The Covid-19 pandemic has sparked dramatic changes to the wealth management industry, making clients more cautious, more digitally savvy and more interested in sustainable investments, according to a UBS Group AG executive in Hong Kong. “The whole pandemic has transformed the business and also the way we operate,” said Amy Lo, co-head of Asia Pacific wealth for the Swiss bank. “The world has become more digital, less global and more local.” Lo says clients across the region have become more cautious, concerned about preserving their wealth and re-balancing portfolios as the global economy heads into its steepest contraction since the Great Depression. “Diversify and navigate volatility,” is the goal for many clients, said Lo, whose firm manages more than $400 billion in the region. UBS’s investments in its digital platform are paying dividends amid the pandemic, allowing clients to interact with the bank through online conferences, chats, and trading, she said.
Amundi Lifts Pandemic Hiring Freeze
Brief: Amundi, Europe's largest listed asset manager, has lifted a hiring freeze it imposed shortly after the onset of the coronavirus pandemic, making it one of the first major investment firms to ease recruitment related restrictions. A spokesperson for the Paris-headquartered asset manager, which put a hold on making new hires globally at the end of March, toldFinancial Newsit has "resumed recruitment on a case-by-case basis". Amundi, which employs around 4,500 people and manages €1.5tn globally, previously told FNthat the onset of the Covid-19 outbreak and subsequent government containment measures put in place hadprompted it to pause new hires. The lifting of Amundi's hiring freeze comes as predictions point to an uncertain future for those working in the financial services sector. According torecent figures from recruitment firm Morgan McKinley, jobs available in the City have dropped by 51% since March 2019 – a drop which has coincided with the onset of the Covid-19 pandemic.
