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Our briefing for Monday August 10, 2020:
Aug 10, 2020 3:41:00 PM
- Over 97,000 students tested positive for COVID-19 in the U.S. during the last two weeks of July, according to a study by the American Academy of Pediatrics and the Children's Hospital Association. The study directly contradicts President Donald Trump’s assertion that children are “almost immune” to the virus. In Florida, one of the hardest hit states, nearly 20 per cent of people tested have been confirmed positive, however, the majority of the state will be opening schools for in-person classes this week. The decision is being made despite recent reports of two teens dying from the virus in Florida last month.
- Canada’s total number of COVID-19 cases has reached nearly 200,000 with total fatalities reaching almost 9,000. The country reported 195 new cases of the virus on Sunday along with 5 new deaths. The majority of new cases came from Quebec, the hardest hit province in Canada, where there have been 5,695 deaths recorded. Across Quebec protests have erupted with parents threatening legal action as schools are set to reopen in the upcoming months. In Canada, over 86 per cent of those who contracted the virus have since recovered and the number of new infections continues to decline.
- In the United Kingdom officials are debating whether to continue with daily death toll announcements after Public Health England has come under scrutiny for their method of tracking new deaths from the virus. Health Secretary Matt Hancock has revealed that an investigation into the matter suggested that Public Health England was “exaggerating” the real number of fatalities. The country had paused its daily death toll announcements after academics had shown that agency had counted deaths from other causes. Officials are still debating whether to continue with daily updates or move to weekly updates in the future.
- New Zealand has gone 100 days without a new case of COVID-19. The country is beginning to return to normal with no boundaries on social gatherings as patrons flock to bars and sports fans return to packed stadiums. “It was good science and great political leadership that made the difference,” Michael Baker, an epidemiologist at the University of Otago, said. New Zealand’s Prime Minister Jacinda Ardern had taken drastic steps at the beginning of the pandemic to lock down the island nation before the virus could spread significantly throughout the population. Now facing an election on September 19th, Ardern is the favorite by a large margin after being praised globally for her response to the pandemic.
- Meanwhile, in Australia strict lockdowns have been put in place in Melbourne and parts of the southeast as the country had its deadliest day on record. 19 more Australians succumbed to the virus on Monday, but officials are optimistic as Victoria, the hardest hit state, recorded a two-week low with 322 new cases. Victorian Premier, Daniel Andrews is facing criticism for lapses in quarantine procedures that has allegedly allowed the virus to spread. Especially effected are long-term care facilities which have seen significantly more deaths than in previous years. National Treasurer Josh Frydenberg has said the government must explain the “serious failures” in quarantine arrangements.
Covid-19 – Due Diligence And Asset Management
GPT bleeds $520 million
Brief: Real estate investment trust GPT Group has bled $519.1 million after tax for the first half of the year, pointing to COVID-19 related negative property movements for the heavy losses. All properties in the trust were independently valued during the period, resulting in a devaluation of $711.3 million, GPT said. "We have had all our assets revalued during the period with our retail assets revalued by independent valuers in May and again at the end of June as the effects of the pandemic were becoming more apparent," GPT chief executive Bob Johnston said. "The independent valuers have made allowances for both the near-term impacts of the pandemic and also the effects that it is expected to have on the broader economy." Government imposed lockdowns also saw rental collections drop sharply during the first half of the year, with GPT providing relief to both tenants impacted by the government's commercial tenancy Code of Conduct as well as those not eligible for assistance.
L&G expects pension risk transfer activity to continue apace
Brief: Legal & General Retirement Institutional has announced that despite COVID-19, 2020 is expected to be the second largest year on record for the pension risk transfer (PRT) market. Longevity imageUK PRT is expected to transact £20bn to £25bn, which demonstrates the resilience of this marketplace. Since L&G’s market entry in 2015, their US business has written more than $3.9bn of PRT with 56 clients, which includes four transactions being made in H1, 2020. The success of L&G’s half year results could be down to them being the only insurer who provides PRT directly to pension plans globally. In May, during the height of the UK lockdown, they undertook the first international PRT transaction for IHS Markit. This transaction secured benefits for both their UK and US pension plans.
Currencies Likely To Reflect Countries' Pandemic Strategy Success
Brief: During the height of the pandemic-induced market turmoil in March, currencies performed mostly according to how they moved with equities - their equity beta, or how risk-on or risk-off they were. That is now changing. Increasingly, currencies will start to reflect how well countries are dealing with the coronavirus pandemic. We look at which currencies could benefit from that dynamic. Each currency can be placed on the spectrum between risk-on (cyclical) and risk off (defensive). Risk-on currencies do well when equity markets rise. The opposite is true for risk-off currencies. During 2020, this equity beta explained the fate of developed and emerging-market currencies very well. The traditional safe havens of the Japanese yen, Swiss franc and U.S. dollar were the big winners during the height of the coronavirus-induced market turmoil in March.
Coronavirus punishes Warren Buffett as Berkshire Hathaway takes big writedown
Brief: Berkshire Hathaway Inc on Saturday announced a $9.8 billion writedown and 10,000 job losses at its Precision Castparts aircraft parts unit, as the coronavirus pandemic caused widespread pain at Warren Buffett's conglomerate. Despite the writedown, Berkshire said second-quarter net income surged 87% because of gains in stock investments such as Apple Inc as markets rebounded. Operating profit fell 10%, cushioned by a temporary bump at the Geico auto insurer, as the pandemic caused "relatively minor to severe" damage to most of Berkshire's more than 90 operating businesses. "The writedown was prudent," said Cathy Seifert, an equity analyst at CFRA Research. "It's a recognition of what the market has long believed, that the purchase price was rich, and the integration not as smooth as many would have hoped."
Some office space could get permanently cut during the pandemic. Here’s how companies will cope
Brief: Working from home has become the norm during the coronavirus pandemic, and Morgan Stanley predicts that office tenants across Asia will permanently give up between 3% and 9% of their existing office space. That will result in rent declining between 10% and 15% over the next three years, a recent report by the investment bank estimated. Big tenants from the financial and IT industries, which have well established business continuity plans or work-from-home infrastructure, could give up even more office space — at 10% over the next three years, said the report. Below is the projected rental impact from June 2020 to December 2022, according to the report which assessed the rental impact on key financial centers in Asia Pacific.
It’s Lonely Trying to Kill This Covid-19 Diagnostics Deal
Brief: Davidson Kempner Capital Management LP doesn’t usually conduct activism in public by itself. Its attempt to kill the $12 billion takeover of Qiagen NV, a European company that makes instruments that detect Covid-19, was a high-profile place to start. The hedge fund says a bid from U.S. diagnostics group Thermo Fisher Scientific Inc. is too low given the testing business will become stronger due to the pandemic. Its campaign has helped secure a justified 10% bump on the opening bid, to 43 euros ($50.71) per share. It still wants more. Judged on near-term valuation multiples, the deal can be seen as cheap despite the sweetener. It’s worth 22 times the $2.28 earnings per share Berenberg reckons the company will make this year. (Qiagen says it will make “at least” $2 per share.) That’s substantially lower than the earnings multiples on which diagnostics peers trade. It’s also at the bottom of Qiagen’s trading range prior to a shock sales warning in October that pummeled the shares and led to the sudden replacement of its chief executive officer.
