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Our briefing for Monday January 4, 2021:
Jan 4, 2021 3:07:59 PM
- In the United Kingdom, Prime Minister Boris Johnson announced another coronavirus lockdown via a televised address Monday evening. Everyone in England must stay at home, except for permitted reasons starting midnight Tuesday. The permitted reasons are similar to the first lockdown in March 2020, so essential medical needs, food shopping, exercise and work for those who can’t do so from home. On Monday, the UK recorded more than 50,000 new COVID-19 cases for the 7th day in a row.
- In the United States, Operation Warp Speed is not living up to its moniker. According to data from the U.S. Centers for Disease Control and Prevention (CDC), the federal government has distributed more than 15 million doses to states and territories. However, less than a third (4.5 million) have actually been administered so far. There were repeated promises of 20 million Americans being vaccinated by the end of 2020. In a news conference on Monday, New York State Governor Andrew Cuomo said they will be fining hospitals that don’t administer the allotted COVID-19 vaccines within a week of receiving their supplies and will decline to provide them with further doses for failing to do so. “I don’t want the vaccine in a fridge or a freezer, I want it in somebody’s arm. If you’re not performing this function, it does raise questions about the operating efficiency of the hospital,” said Cuomo.
- In Canada, as COVID-19 cases continue to climb and some provinces are in a form of lockdown, the public is raising eyebrows at the conduct of some of their elected politicians. Multiple media reports have uncovered several federal and political politicians travelling over the holiday season, either for leisure, or to visit an ailing relative. The federal government has advised Canadians throughout the pandemic to avoid all-non-essential travel and are introducing new testing requirements for those planning to travel by air this week. The majority of MPs and MPPs/MLAs called out via the media have stepped down from either a cabinet post or other higher profile duties. The exception seems to be the province of Alberta where their Premier Jason Kenney took responsibility for not being clear about travel rules and has now ordered MLAs should not leave the country, unless it’s for government business. Premier Kenney said he planned not to sanction members of his party for their actions.
- China has stepped up their efforts to suggest the COVID-19 pandemic started somewhere else. In an interview with a state broadcaster over the weekend, Foreign Minister Wang Yi stated: “more and more research suggests that the pandemic was likely to have been caused by separate outbreaks in multiple places in the world.” The comments come as the World Health Organization (WHO) is expected to be granted access to Wuhan for the first time this month. The WHO has been to China over the past year, but never granted access to Wuhan, considered to be ground zero for the coronavirus pandemic.
- Philippine President Rodrigo Duterte has warned legislators of a “crisis” if they push forward with an investigation of unauthorized use of COVID-19 vaccines. A media report has suggested around 100,000 Chinese nationals working in the Philippines have been inoculated as early as November, along with President Duterte’s security team. The president has told his security team to ignore summons from the Congress, adding “there will be a little crisis. I am prepared to defend my soldiers. I won’t allow them to be brutalized in hearings.” Health regulators have yet to approve any vaccinations for use in the Philippines.
- Japanese media are reporting Prime Minister Yoshihide Suga is considering declaring a state of emergency in Tokyo and surrounding areas as early as January 7th. The measures would last a month and grant power to local governments to urge residents to stay home and order some businesses to close or limit operations. Japan’s state of emergency differs from what has been seen in some European nations such as France, Italy and the UK. Due to civil liberties enshrined in the country’s postwar constitution, Japan’s government can’t send police to clear people off the streets.
Covid-19 – Due Diligence And Asset Management
Hedge Funds Bet on Recovery in 2021
Brief: Hedge funds, which use leverage and employ more aggressive, often riskier strategies than other investors, believe many previously undesirable sectors, ranging from energy to retail, will rebound in 2021. Accounting for roughly $3 trillion in assets, hedge funds showed resilience in 2020, with many outperforming the market, according to investors. “We think 2021 is going to be a really positive year for the markets,” said Jason Donville, president and CEO at Toronto-based hedge fund Donville Kent Asset Management. He forecasts an explosion of pent-up demand for travel and leisure producing a period of “super growth.” “I think it will take a little while for the vaccines to roll out and then somewhere around March, April, May, you’re going to get a confluence of the vaccines getting to a certain critical mass... and infection rates dropping.” For 2020 as a whole, the S&P 500 unofficially rose 16.26%, a stunning rally from a bear market that kicked off when the pandemic spread rapidly earlier in the year. “What I would say about 2021 is it looks like it’s going to be a year of recovery,” said Robert Sears, chief investment officer at UK-based Capital Generation Partners, which invests in hedge funds globally. “That’s the consensus view.”
Over 80 Per Cent of Major Investors Believe Global Financial Crisis is a Possibility
Brief : Eighty three per cent of institutional investors believe that a global financial crisis is a possibility, with 60 per cent expecting the next severe crisis to occur in the next one-to-three years, according to Block-Builders.net. A new infographic - https://block-builders.net/crash-alert-83-of-major-investors-believe-gl… - highlights that around 80 per cent of major investors believe that markets have not yet sufficiently priced in the long-term risks posed by the Corona crisis, while more than half see the advantage of a defensively oriented portfolio. Institutional investors remain largely unanimous in their view that, despite all the risks, securities from the Asian region have great growth potential. One of the reasons for this is the fact that countries such as China have got a better grip on the pandemic and their economies are now correspondingly growing much faster. Meanwhile, the scars left by the pandemic on business owners' coffers are becoming ever clearer. The situation is most critical in the case of the hospitality industry, where 19 per cent of businesses report having only 4 weeks of cash reserves. Across all sectors, 11 per cent of entrepreneurs say they only have reserves for just under 4 weeks. "Despite all the risks, many stocks are still trading at all-time highs," says Block-Builders analyst Raphael Lulay. "Whether we are already in the midst of a speculative bubble remains to be seen. Many market participants continue to see the stock market as almost without alternative".
Airlines Slam ‘Confusion’ New COVID-19 Testing Rules Create for Carriers, Passengers
Brief: Airlines say a slew of questions remain about the federal government's decision to require passengers returning to Canada to show negative results on COVID-19 tests taken abroad. Transport Minister Marc Garneau announced Thursday that air travellers overseas will have to present proof of a negative molecular test — known as a PCR test, conducted with a nasal swab — that was taken within 72 hours of departure, unless the testing is unavailable in that country. National Airlines Council of Canada chief executive Mike McNaney says the Transport Department has yet to provide a list of foreign agencies whose tests are considered acceptable or to establish how airline employees should determine whether a test document is valid. He says the new rule, which mandates a 14-day quarantine in Canada regardless of the test result, will cause "confusion" and "frustration" for carriers and passengers alike. Air Transat vice-president Christophe Hennebelle says Ottawa announced the requirement, which takes effect this Thursday, "out of the blue" without any prior consultation or notice to industry. Transport Canada did not immediately respond to questions Monday. The rule comes as a devastated airline sector continues to bleed cash following a collapse in demand caused by the pandemic. It also arrives amid growing criticism of the federal sick-leave benefit that pays $500 per week for up to two weeks to Canadians quarantined after touching down from abroad, including after vacations.
Blank-Check Deals, Distressed M&A to Headline 2021 Trends
Brief: The new year is expected to be a mergers and acquisitions bonanza as deal makers attempt to put the pandemic behind them, meaning attorneys must be on top of trends like the continued use of special purpose acquisition companies and an anticipated increase in distressed M&A. The coronavirus pandemic caused a short-term slowdown in the pace of deal-making last year, but players in the M&A space didn't spend too much time on the sidelines; after initial shockwaves from the virus-induced shutdowns decimated figures for the second quarter, the third and fourth quarters of 2020 were relatively strong. As of Dec. 10, the total value of U.S.-targeted M&A deals announced in the third and fourth quarters totaled $915 billion, far greater than the $378.4 billion overall value of deals across quarters one and two, according to data provided by Dealogic. "There was a slowdown in the first two months post-shutdown," said Susan Oakes, an M&A partner at Holland & Hart LLP. "But once things settled into place, the deals that were on hold restarted, and we've been really extraordinarily busy." In 2021, clients will look to build on the momentum from the end of 2020, but they'll have to do so in a landscape that has been significantly altered because of the once-in-a-century pandemic.
The NYC Billionaires Who Got Richer During the COVID-19 Pandemic
Brief: Big Apple billionaires are booming — with a collective wealth that ballooned by $81 billion to more than $600 billion during the pandemic, according to an analysis. That 16 percent surge among Gotham fat cats since mid-March included big gains for former Mayor Mike Bloomberg, the city’s richest person, whose financial data and media empire shot up by $6.8 billion to some $55 billion, a 14 percent spike, says Americans for Tax Fairness and the Institute for Policy Studies, which crunched the Forbes data. President Trump also did quite well, as his net worth grew by $420 million, jumping from $2.1 billion to $2.5 billion, a 20 percent increase, the data shows. New Mets owner and hedge fund titan Steve Cohen is also among the metro-area billionaires — a class of 141 — who had a great 2020, adding $700 million to his pile, which now totals $14.6 billion, a 5 percent uptick. Buoyed by trillions in federal COVID-relief largesse, Wall Street powerbrokers notched some of the largest gains. Stephen Schwarzman of Blackstone Group fattened his wallet by some $5 billion to about $21 billion, a 34 percent gain. JPMorgan’s Jamie Dimon’s holdings went from $1.2 billion million to $1.5 billion, about a 29 percent increase.
Hedge Fund Launches Rise as Industry Positions for Growth in 2021
Brief: New hedge fund launches increased to the highest level in five quarters in Q3 2020 on optimism in the US economy, as managers and investors positioned for acceleration of performance gains and capital growth into 2021, according to the latest HFR Market Microstructure Report, released today by HFR. New hedge fund launches increased to an estimated 151 in Q3 2020, the highest quarterly launch total since 2Q19 and exceeded the estimated quarterly liquidations for the first time since 2Q18. Launches in the most recent quarter exceeded the 2Q estimate of 129 new funds, bringing the YTD 2020 launches to 364 through Q3, a period which included a record low number of fund launches in 1Q as the global pandemic began. Fund liquidations fell to an estimated 137 in Q3 2020, the lowest liquidation total since 2Q18 and marked a decline of over 50 percent from the 304 liquidations in Q1 2020. Through Q3 2020, an estimated 619 funds liquidated in 2020, with nearly half of those occurring in Q1 2020. The investable HFRI 500 Fund Weighted Composite Index® advanced +5.1 per cent in November, increasing its YTD return to +6.1 percent and topping the +3.9 per cent YTD gain of the DJIA. The HFRI 500 Equity Hedge Index led strategy performance in November with a +7.5 per cent return, bringing YTD performance to +10.9 per cent. Over the first eleven months of the year, the HFRI 500 EH: Technology Index led all strategy performance with a +23.5 per cent return. In addition to strong performance of the HFRI Indices, the HFR Cryptocurrency Index surged +52 per cent in November, bringing the YTD return to +156 per cent.
