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Our briefing for Monday, August 23, 2021:
Aug 23, 2021 4:07:45 PM
- In the United States, a ban on non-essential travel for Canada and Mexico has been extended for another month. The ban, which was first put in place in March 2020, will be extended until at least Sept. 21. The Department of Homeland Security said they’re working closely with medical experts to determine how normal travel can resume. The U.S. still bans most non-U.S. citizens who within the last 14 days have been in the United Kingdom, China, India, South Africa and Brazil as well as 26 countries in Europe. Earlier this month Justin Trudeau’s government allowed fully vaccinated American tourists to enter Canada for non-essential reasons.
- In Canada, several industry groups in the province of B.C. are calling for vaccine passports. The groups sent a letter to B.C. Premier John Horgan on Thursday, asking for a proof of vaccination program to be mandated by government and health officials. The groups ask for the program to be mandated so that “the onus of enforcing the program does not fall on businesses.” The letter was signed by 10 industry groups including the B.C. Hotel Association, the Tourism Industry Association of B.C., and the Retail Council of Canada. Quebec has already announced a vaccine passport program that will begin on Sept. 1.
- In the United Kingdom, the government has removed 57 private Covid-19 test providers from their website because they no longer provide the right kind of tests. Further, more than 80 test providers will be issued two-strike warnings over misleading prices. The tests are mandatory for international travellers entering the U.K., but one of the biggest complaints from travellers has been that the costs of the tests don’t actually match the costs listed on the website. "It is absolutely unacceptable for any private testing company to be taking advantage of holidaymakers and today's action clamps down on this cowboy behaviour,” said Health Secretary Sajid Javid.
- In France, the government’s health pass has come into effect, despite the number of protests that have taken place across the country. For a sixth consecutive week, thousands of people marched in cities across France, with four different demonstrations taking place in Paris. Protesters marched with flags and banners that had the word “Liberty” on them as they chanted “Macron, we don’t want your pass!” Protesters believe the health pass restricts their freedom, as it is now required for entry to restaurants and cafes, sports and cultural venues and for long-distance travel. Recent polls have shown that the majority of people in France still support the health pass.
- South Korea will receive another 7.01 million doses of Moderna by the first week of September. The health ministry said that about 1 million of those doses will arrive by Monday after the government made a request for delivery to speed up. The statement comes shortly after Moderna informed South Korea that they’d only be able to deliver less than half of the 8.5 million doses that were expected in August. "In response to our request to speed up and expand the vaccine supply, Moderna informed us that it will supply 7.01 million doses by the first week of September," the ministry said in the statement.
- In Australia, New South Wales saw a total of 830 new cases on Sunday as their lockdown continued. Police reported that breaches of public health orders have resulted in 940 fines in the past 24 hours. Prime Minister Scott Morrison defended the lockdown strategy on Sunday, saying it will remain in place until at least 70% of the population is vaccinated. "Lockdowns are not a sustainable way to deal with the virus and that's why we have to get to the 70% and 80% marks, so we can start living with the virus," Morrison said during a television interview.
Covid-19 – Due Diligence And Asset Management
Dividend payouts to hit $1.4 trillion in 2021, nearing pre-pandemic levels, research shows
Brief: Dividends paid to investors are projected to hit $1.39 trillion in 2021, reflecting a recovery that’s stronger than expected, according to a new report from British asset manager Janus Henderson. The 2021 forecast for dividends is just 3% below the pre-pandemic peak, the firm found. Dividend payments in the second quarter jumped 26% from the same period last year to $471.7 billion, just 6.8% below the levels seen in the second quarter of 2019. Janus Henderson projected that dividend payouts will return to pre-pandemic highs within the next 12 months. The research, published Monday, said 84% of companies around the world either increased or maintained their dividends compared to the same quarter in 2020. Much of the growth was attributed to companies restarting frozen payouts and issuing higher special dividends on the back of strong earnings. Underlying dividend growth in the second quarter, stripping out the effects of special dividends and exchange rates, was 11.2%.
Goldman, BofA See Lost Decade Over for Emerging Markets
Brief: Expectations for a recovery in commodity prices and earnings growth are igniting bullish bets on emerging-market equities after more than a decade of underperformance that left them approaching a 20-year low against developed-nation stocks. Goldman Sachs Group Inc., Bank of America Corp. and Lazard Asset Management expect a boost for developing equities as investors capitalize on cheap valuations once vaccine rollouts pick up, helping the global economy to recover from the pandemic. South Africa, Russia and Brazil are among markets set to benefit, even as China’s regulatory crackdown continues to weigh on Asian equities. In the decade following the global financial crisis, MSCI Inc.’s emerging-market stock index gained just 8%, while the benchmark for developed nations more than doubled. That’s partly due to the slowdown of Chinese economic growth from above 10% in 2010 to around 6% by the end of the decade, resulting in a decline for commodity prices and weak earnings growth.
UK growth slows to six-month low as post-lockdown shortages bite
Brief: Britain's post-lockdown economic rebound slowed sharply in August as companies struggled with unprecedented shortages of staff and materials, though strong inflation pressures cooled a bit, a survey showed on Monday. The IHS Markit/CIPS flash composite PMI dropped for the third month in a row, sinking to 55.3 from 59.2 in July, its lowest since February and a sharper fall than a median forecast of 58.4 in a Reuters poll of economists. The pace of growth was still slightly above the pre-pandemic average but IHS Markit said there were clear signs of the recovery losing momentum after a buoyant second quarter. "Despite COVID-19 containment measures easing to the lowest since the pandemic began, rising virus case numbers are deterring many forms of spending, notably by consumers, and have hit growth via worsening staff and supply shortages," Chris Williamson, chief business economist at IHS Markit, said.
Big Canadian banks set to release earnings as economy shifts to reopening
Brief: Investors in Canada's major banks will be looking for signs of loan growth, impacts of the Delta variant and hints of what the Big Six may do with their cash reserves when they report this week. The banks are widely expected to further unwind the record-breaking amounts of money they set aside last year — at least $16.5 billion across the Big Six — to cover widespread loan defaults that never materialized. Shareholders, however, have already largely factored in the earnings boost from the reserve winddown, as was already seen in U.S. bank earnings last month, said James Shanahan, senior equity research analyst for North American financials at Edward Jones. “In some cases there were earnings beats of 10, 20, 30 per cent, and the stocks were down. So the market clearly isn’t going to reward the Canadian banks if they deliver huge earnings beats and it’s just simply related to reserve releases.”
Energy hedge fund Westbeck’s momentum halted, as rising Covid cases send oil equities into retreat
Brief: Energy-focused hedge fund manager Westbeck Capital Management’s flagship strategy has suffered its first monthly loss in eight months, after surging coronavirus rates in China, Europe and North America dented oil markets – but the fund remains up more than 70 per cent since the start of the year. The Westbeck Energy Opportunity Fund – a long/short directional hedge fund strategy which trades a mix of oil equities, futures and options – fell 5.3 per cent in July. By comparison, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which tracks oil services companies, lost 14.4 per cent in July, while and Brent (total return) gained 2.1 per cent. The USD230 million manager – which is led by co-founders Jean-Louis Le Mee, CIO, and Will Smith, CEO and deputy CIO – has profited from a resolutely bullish stance on oil for much of this year.
