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Coronavirus Diligence Briefing

Our briefing for Monday March 15, 2021:

Mar 15, 2021 3:35:24 PM

  • In the United States, the Centers for Disease Control and Prevention (CDC) said America could still see another surge of coronavirus cases as more states relax restrictions and more people start to travel for spring break. The Transportation Security Administration (TSA) said screenings have topped one million every day since Thursday, hitting the best stretch in a year, but CDC Director Dr. Rachel Walensky is warning Americans of any non-essential trips. “I’m pleading with you, for the sake of our nation’s health. Cases climbed last spring, they climbed again in the summer, they will climb now if we stop taking precautions when we continue to get more and more people vaccinated.” According to the CDC, 37.5 million people, or just 11% of the American population have been fully vaccinated so far.

  • The European Union’s (EU) big three – Germany, France and Italy - all said Monday they would pause the usage of the AstraZeneca COVID-19 vaccine throwing the 27-nation bloc’s vaccination campaign into further disarray. Denmark and Norway stopped giving the inoculation last week after reported isolated cases of bleeding, blood clots and a low platelet count. Iceland and Bulgaria followed suit, then Ireland and Netherlands announced similar moves over the weekend. The World Health Organization appealed to EU nations to reconsider the suspension of the AstraZeneca vaccine saying systems are in place to protect public health.

  • Following the moves made by Germany, France and Italy on Monday, Canadian Prime Minister Justin Trudeau tried to offer reassurances to the country that the AstraZeneca COVID-19 vaccine is indeed safe to use. “Health Canada and our experts and scientists have spent an awful lot of time making sure every vaccine approved in Canada is both safe and effective. Therefore, the very best vaccine for you to take is the first one that is offered to you,” said Trudeau. The Prime Minister added that none of the AstraZeneca doses Canada received are from the batch linked to possible side-effects reported in Europe.

  • In the United Kingdom, Prime Minister Boris Johnson weighed in on the AstraZeneca coronavirus vaccine as well. During a virtual news conference, Prime Minister Johnson reiterated his confidence in one of the vaccines his government is currently using in its vaccination push. “In the MHRA (Britain’s medicines regulator), we have one of the toughest and most experienced regulators in the world. They see no reason at all to discontinue the vaccination programme. So, we continue to be very confident about the programme and it’s great to see it being rolled out at such speed across the UK.”

  • Bloomberg is reporting Dubai is conducting a clinical trial to assess the accuracy of a breath test to detect the coronavirus within one minute. The rapid test is being developed by the National University of Singapore’s Breathonix and being trialled on 2,500 patients in coordination with the Dubai Health Authority and Mohammad Bin Rashid University of Medicine and Health Sciences. 

  • According to the media source, The Age, Australia and Singapore are moving towards establishing a travel bubble that will hopefully be ready to go by July or August. The two nations would allow each other to have their fully vaccinated citizens travel back and forth for work or leisure. The Age reported Australia’s Trade Minister Dan Tehan and Government Services Minister Stuart Robert were driving the plan and behind-the-scenes policy work. The reported travel bubble would be well before the broader reopening of international borders by Australia thought to be sometime in October, depending how the pandemic is throughout the rest of the world.

Covid-19 – Due Diligence And Asset Management

A Year Since Black Monday 2 and a Round Trip for Markets

Brief : It’s a year since COVID-19 mayhem sent the S&P 500 index reeling 12% for its second-worst day ever, yet the bull market born from that selloff has in the subsequent 12 months added more than $40 trillion to the value of world stocks. On March 16, 2020, when the S&P 500 endured its worst one-day fall since the “Black Monday” of October 1987, MSCI’s global equity index plunged almost 10%, only to rise back thanks to huge central bank support. Effects have rippled out to every market sector. Here is a look at markets that day and in the year since: As COVID-19 spread around the world between late February and the end of March 2020, triggering unprecedented lockdowns, world stocks saw their market value collapse by $21 trillion. Markets troughed on March 23, then claimed a record high five months later. The market capitalisation of the MSCI global index has risen $40 trillion between March 23 and now, making it a $65 trillion round-trip.

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Two Sigma Plans to Test Remote Work Twice a Week After Labor Day

Brief: Two Sigma Investments won’t require employees to return to the office until at least September and will experiment with a hybrid model that allows them to work remotely two days a week. Employees should expect to return after Labor Day, “but that’s going to depend on the science, the availability of vaccines, and schools opening, global regulations,” Two Sigma Chief Technology Officer Jeff Wecker said Monday during the AI and Data Science in Trading conference. The $58 billion quant firm, which has gradually allowed staff to return to its U.S. offices, plans to re-evaluate the hybrid model before the middle of next year. Employees have been working remotely since last March. Wecker joined New York-based Two Sigma in July from Goldman Sachs Group Inc. -- in the middle of the pandemic -- and said he hasn’t been able to meet many of his new colleagues in person. “I’m looking forward to seeing everybody,” he said.

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IMF Research Shows Top Firms Becoming More Dominant During Pandemic

Brief: The coronavirus pandemic has significantly strengthened the market power of dominant firms, which could drag on medium-term growth and stifle innovation and investment, the International Monetary Fund said on Monday in a new research paper. Key indicators of market power are on the rise, including price markups over marginal costs, and the concentration of revenues among the four biggest players in a sector, the IMF study said. Part of this was due to increased bankruptcies as the pandemic caused competition to fall away. “Due to the pandemic, we estimate that this concentration could now increase in advanced economies by at least as much as it did in the 15 years to end of 2015,” IMF Managing Director Kristalina Georgieva said in a blog post accompanying the paper. “Even in those industries that benefited from the crisis, such as the digital sector, dominant players are among the biggest winners.”

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CEOs Become Vaccine Activists as Back-to-Office Push Grows

Brief: Some chief executive officers are so eager for their employees to get vaccinated against Covid-19 that they’re granting workers time off or cash incentives to get shots. In the U.S., retailer Lidl is giving its staff $200, while Aldi, Dollar General Corp. and Trader Joe’s Co. are offering extra hours of pay. Online grocery delivery firm Instacart Inc. is providing a $25 stipend for workers and contractors. Yogurt makers Chobani LLC and Danone SA are offering as much as six hours of paid leave, and the French company says it will cover the cost of inoculation in countries where vaccines aren’t free. Other companies are taking a harder line. U.K. handyman empire Pimlico Plumbers Ltd. has said it plans a “no jab, no job” policy for new members of its workforce. United Airlines wants to make shots mandatory, drawing concerns from unions. Many CEOs see themselves as leaders of the fightback against a pandemic that’s killed more than 2.6 million people. They’re standing up against anti-vaccination sentiment that’s strong in countries like the U.S., France and Russia, and trying to keep their workers safe. For some, there’s also a more pragmatic motivation: Vaccination will facilitate a return to the office after a year of working from home that’s strained corporate cultures and spawned a new epidemic of Zoom fatigue.

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PE Investors Expect a ‘U-Shaped’ Recovery, says Mazars

Brief: PE investors expect a ‘U-shaped’ recovery, according to ‘Covid-19 and the world of private equity: optimism in an uncertain environment’, a survey released today by audit firm Mazars, that gauges investor sentiment in the institutional funding market. While the majority (63 percent) of respondents still anticipate a U-shaped recovery - compared to 82 percent in June - the number of respondents expecting a V-shaped recovery has increased from 10 percent to 27 percent - likely on the back of vaccinations starting in Q1 2021, in combination with business support schemes being implemented by governments. Meanwhile, around 70 percent of respondents report seeing more distressed opportunities, according to the research. This figure compares to 54 percent of respondents in June saying they had come across distressed opportunities. Despite expectations that revenues will fall over the next 12 months, participants in the survey view the decline as less severe than previously reported. Some 30 percent of respondents expect a fall in revenue of 11 percent to 25 percent, compared to 50 percent of respondents in the June 2020 survey. A little over one third, or 39 percent, of respondents said they focus on originating new platform opportunities.

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Euro Finance Chief sees Need for Fiscal Aid Even as Crisis Fades

Brief: Euro-area governments should be ready to keep up emergency support for their economies even after the worst of the coronavirus crisis is behind them, according to the official who leads meetings of the region’s finance ministers. Speaking before chairing a virtual gathering of his counterparts on Monday, Paschal Donohoe warned that the currency zone will require ongoing aid as it recovers lost ground to reach its pre-pandemic growth levels. “There will be a need for the euro area and for finance ministers to continue to support our economies beyond the acute emergency of large parts of last year and parts of this year,” the so-called Eurogroup president said in an interview. “The risk and consequences of cutting support too early are currently bigger than the risks of pulling support too late.” Donohoe, who is also Ireland’s finance minister, spoke before a discussion with colleagues that is expected to result in a pledge to keep fiscal policy in the region supportive through next year, and to only gradually ease support for businesses and workers. Such a commitment would help cement more aid that already totaled about 8% of euro zone output in 2020, along with a new stimulus fund and liquidity schemes worth around a fifth of gross domestic product. To allow that support, the European Commission this month signaled it will extend its suspension of rules limiting debt through next year.

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Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Topics:Coronaviruscovid-19