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Our briefing for Friday September 25, 2020:
Sep 25, 2020 3:38:47 PM
- United States Senator Elizabeth Warren (D-Mass.) and Representative Ro Khanna (D-Calif.) have penned an inquisitive letter to the Defense Department’s acting inspector general Sean O’Donnell on Friday questioning the use of $1 billion in Cares Act stimulus funding for purposes other than coronavirus relief. According to Warren and Khanna, the Defense Department has repurposed funds intended to aid with pandemic resources and channeled them into funding drone technology, body armor and dress uniforms. The stimulus package which was set aside in March was intended to be used to “prevent, prepare for, and respond to coronavirus.” The letter also questions whether the defense contractors that were subsidized by the stimulus package had also received coronavirus relief loans from the Small Business Administration.
- Prime Minister Justin Trudeau today announced that Canada will spend $440 million to ensure that COVID-19 vaccines are available world-wide and will not be available only to the wealthiest countries. Canada, along with 64 of the world’s richest nations, has joined the international COVID-19 Vaccine Global Access Facility, dubbed COVAX. Meanwhile, the federal government has already committed over $1 billion to gain private access to millions of doses of potential coronavirus vaccines that are currently undergoing late-stage testing. The 6th and most recent deal between the federal government and pharmaceutical company AstraZeneca will see Canada receive up to 20 million doses of its vaccine, however, if the vaccine is not approved for use, the cost incurred by the government is almost entirely non-refundable.
- The United Kingdom has seen its largest single-day increase in new cases of COVID-19 since the pandemic began. The country recorded 6,634 infections on Thursday, soaring past any number seen before the country was put on a nationwide lockdown. The news comes as the rest of Europe is experiencing a resurgence of the virus. The U.K. is pointing to increased testing to explain the extraordinarily large number of new cases, Health Secretary Matt Hancock is insisting that the country is still in better shape than when the virus first emerged. Government estimates are suggesting that nearly 100,000 people were being infected daily at the start of the pandemic, “now we estimate that it’s under 10,000 people a day getting the disease,” Hancock said. “That’s too high, but it’s still much lower than in the peak.”
- Similar to the situation in the U.K., France has also broken a daily record for new cases of COVID-19. Just over 16,000 new cases were confirmed on Thursday, marking the fourth time that record has been broken over the past 14 days. The French government has announced a new round of lockdown protocols which will see all restaurants and bars closed in Marseille and a strict diminishment of business hours for those in Paris. The announcement is met with distain from local politicians and businesses, with some dissenters suggesting that they should ignore the government regulations altogether. Prime Minister Jean Castex is calling for “responsibility” and said, “what I don't want is that we go back to March,” when forms were required for leaving French households.
- There was an unlikely occurrence in South Korea on Friday after an apology was sent to President Moon Jae-In from North Korean leader Kim Jong Un. The letter from the North’s United Front Department said that Un was “greatly sorry” for the shooting death of a South Korean official in North Korean waters. A man was shot and burned, according to South Korean reports, as he was caught floating on a raft and suspected of defecting. The letter claims that the incident was “unexpected” and “unfortunate,” it also explains that such actions were taken due to North Korean guidelines on coronavirus management. The anti-coronavirus rules in North Korean include “indiscriminate shooting” at anyone who approaches the border without consent.
Covid-19 – Due Diligence And Asset Management
'Headwinds outnumber tailwinds' for the global economy in 2021 and a vaccine is the answer, JPMorgan says
Brief: The global economy is emerging from the depths of the coronavirus crisis. US earnings have smashed expectations and central banks are on permanent stand-by to step in and provide support. And yet the headwinds to the economy easily outnumber the tailwinds, JPMorgan EMEA chief executive Viswas Raghavan says. The coronavirus, which has claimed almost a million lives around the globe and unleashed the worst recession in recent history, has elicited an unprecedented response from the world's central banks and governments. At least $7 trillion in cash to shore up national economies, plus billions in employment protection schemes and other benefits have washed into the financial system, while interest rates are near, or even below, zero to encourage consumption and ward off total economic collapse.
COVID-19 Private Sector Global Facility announced at SDG Business Forum
Brief: The United Nations Development Programme (UNDP), the United Nations Global Compact (UN Global Compact) and the International Chamber of Commerce (ICC) have established the COVID-19 Private Sector Global Facility, a global initiative and collaboration bringing together public and private sector partners to help local communities recover better from the pandemic. Deutsche Post DHL Group, Microsoft Corp. and the PwC network (“PwC”) have already joined the COVID-19 Private Sector Global Facility, and the initiative is open for other like-minded private sector organizations that want to contribute. The Global Facility is a response to corporate calls to action for private sector leaders and governments to work together to address the negative impacts of the coronavirus pandemic. The initiative has been established to better coordinate their responses, helping to ensure that immediate stimulus efforts flow into the real economy. The Global Facility will operate at both the global and national levels. It aims to co-create solutions that are tailored to the phase of the COVID-19 pandemic in a given area and the specificities of the local private sector and government context.
Manager due diligence in times of Covid-19
Brief: A lively debate is currently taking place amongst allocators as to whether onsite due diligence and face-to-face meetings are still necessary given the current environment. The simple answer must be a resounding: yes, absolutely. Due diligence, both investment and operational, has always been an integral part of a well-structured investment process. Those of us who have been around since pre-2008 can certainly attest to the fact that a lot has changed since, and the days are long gone when it was possible for managers to simply refer to their stellar track records and assume that investments would be forthcoming without any other questions being asked. Investors have learnt that having a detailed understanding of a strategy is just the beginning and that the operational framework in which a strategy is implemented is also of great importance.
Deal Or No Deal: M&A Litigation In Light Of COVID-19
Brief: The COVID-19 pandemic has caused significant challenges to M&A transactions. Negotiations have crumbled, closings have been delayed and overall M&A activity has declined. While uncertainty remains about when M&A activity will return to normal, it appears that M&A litigation will increase in the coming months. Cases are being filed across the country as buyers and sellers who entered into M&A deals prior to-or in the early stages of-the pandemic seek legal relief to enforce or excuse obligations under their respective agreements. One of the more talked about disputes involves Victoria's Secret owner, L Brands, who sued Sycamore Partners after Sycamore terminated the parties February 20, 2020 merger agreement based on the material adverse effect (MAE) provision.
Goldman Sachs picks the emerging market currencies to back when ‘the dust settles’
Brief: Goldman Sachs has marked out the Mexican peso as its top emerging market (EM) currency pick “once the dust settles” from the coronavirus pandemic. In a note Thursday, Goldman strategists suggested that while it may be too early to engage with high-yield EM bets, with risks still prevalent and the dollar on the move, it is not too early to start thinking systematically about opportunities once the crisis subsides. Co-Head of Global Foreign Exchange Kamakshya Trivedi and Head of EM Cross-Asset Research Caesar Maasry, along with a team of strategists, identified the peso as the most attractive among “high cyclical beta, high carry longs.” It was closely followed by the South African rand (ZAR) and Russian ruble (RUB).
COVID-19 Forces One of the Biggest Surges in Technology Investment in History
Brief: Companies spent the equivalent of around US$15bn1 extra a week on technology to enable safe and secure home working during COVID-19, reveals the 2020 Harvey Nash/KPMG CIO Survey. This was one of the biggest surges in technology investment in history – with the world’s IT leaders spending more than their annual budget rise2 in just three months, as the global crisis hit, and lockdowns began to be enforced. The largest technology leadership survey in the world of over 4,200 IT leaders, analyzing responses from organizations with a combined technology spend of over US$250bn, also found that security and privacy is the top investment during COVID-19, and cyber security (35%) is now the most “in demand” technology skill in the world. This is the first time a security related skill has topped the list of global technology skills shortages for over a decade. Four in 10 IT leaders report that their company has experienced more cyber attacks, with more than three quarters of these attacks from phishing (83%) and almost two thirds from malware (62%), suggesting that the massive move to home working has increased exposure from employees.
