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Our briefing for Monday September 21, 2020:
Sep 21, 2020 3:19:05 PM
- The United States’ Centers for Disease Control (CDC) made its second bizarre move in a matter of weeks. On Monday, the federal public health agency said it had mistakenly issued guidance on airborne transmission of the coronavirus and that another update would be coming soon. In language that was posted Friday and now removed, the CDC said COVID-19 was most commonly spread through close contact with other people, but growing evidence showed droplets and airborne particles can remain suspended in the air and travel beyond distances of six feet such as in restaurants, fitness classes, choir practice, etc. Last week the CDC had updated its coronavirus testing guidance after a New York Times article stated CDC scientists didn’t write the original update back in August.
- In Canada its two most populous provinces continue to see the largest increases of COVID-19 cases it has seen in months. In Quebec, 586 new cases were reported on Monday, the highest daily increase since May. Montreal and Quebec City, the province’s two largest cities had their COVID-19 alert level raised to orange, just one stage short of its highest level. Ontario reported 425 new cases on Monday, its highest total in three-and-a-half months. The new cases have remained consistent; happening mostly in the province’s high-density populated areas and close to 70% of those new cases are people under the age of 40.
- In the United Kingdom, the country’s chief medical officer and chief scientific adviser said it is in for a very challenging winter. In a televised address, the two said coronavirus cases could hit almost 50,000 a day within weeks on the current trajectory and deaths could top 200 a day by November unless action is taken. Therefore, it is numbers and projections such as these that are forcing Prime Minister Boris Johnson to make his next move on how the government plans to fight the pandemic, which he plans to do on Tuesday.
- In Spain, the city of Madrid is displaying Europe’s highest rate of coronavirus infections. Therefore, as of Monday at midnight, the country has ordered 850,000 people not to leave their neighbourhoods. The new rules will apply for two weeks and people can only exit or enter the affected areas for work, education, health or similar reasons. The city has recorded more than 45,000 new cases in the past two weeks alone.
- Germany will set-up pop-up clinics that will take patients with typical coronavirus or flu symptoms away from the general hospitals. The “fever clinics” as they are being called, are part of the government’s strategy for the expected rise in cases over the autumn and winter months. The country’s health minister said the clinics should be up and running in the autumn, while Germany also aims to step-up protection measures and testing for high-risk groups, such as nursing homes.
- The Czech Republic’s health minister Adam Vojtech resigned on Monday after criticism of his handling of the COVID-19 pandemic, especially during this latest surge. Before the start of the summer, the government lifted almost all of its restrictions imposed during the first wave of the pandemic. Thanks to that move, the Czech Republic has seen the number of infections double in the last month and trail only Spain for Europe’s second fastest COVID-19 new case rate in recent weeks. Roman Prymula, a top epidemiologist who helped lead the country through its initial response back in the spring will be the new health minister, replacing Vojtech.
Covid-19 – Due Diligence And Asset Management
Bank Shares Slide on Report of Rampant Money Laundering
Brief: The financial sector was hit hard Monday following a report alleging that a number of banks, JPMorgan, HSBC, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon among them, have continued to profit from illicit dealings with disreputable people and criminal networks despite previous warnings from regulators. According to the International Consortium of Investigative Journalists, leaked government documents show that the banks continued moving illicit funds even after being warned of potential criminal prosecutions. The report compounded a massive sell-off across global markets because of gloom and doom over COVID-19 infections and the economic damage from the pandemic. The consortium reported that documents indicate that JPMorgan moved money for people and companies tied to the massive looting of public funds in Malaysia, Venezuela and the Ukraine. The bank also processed more than $50 million in payments over a decade for Paul Manafort, the former campaign manager for President Donald Trump, according to the documents, which are known as the FinCEN Files.
Investors Brace for Months of Big Market Swings as Virus, Political Worries Loom
Brief: Investors are bracing for an extended period of market volatility, as worries over a potential resurgence in coronavirus cases and political uncertainty roil stocks. The Cboe Volatility Index, known as “Wall Street’s fear gauge,” hit its highest level in nearly two weeks as concerns over waning fiscal stimulus and the long-term economic consequences of the coronavirus pandemic took the S&P 500 down to a seven-week low on Monday. [.N] Market participants aren’t expecting the turbulence to die down any time soon. VIX futures show that investors are betting that market swings will persist beyond the Nov. 3 U.S. presidential election and into December, reflecting worries over the possibility of a contested election and concerns that a deeply divided government will fail to agree on providing more fiscal stimulus to support the U.S. economy. “It’s not just Election Day that matters to this market,” said Stacey Gilbert, portfolio manager for derivatives at Glenmede Investment Management. “It’s also ‘do we get fiscal stimulus or do we not?’” Those concerns, some investors say, have been sharpened by the death of Supreme Court Justice Ruth Bader Ginsburg, which observers expect to deepen partisan divides as it sets up what promises to be a fierce fight in the U.S. Senate over President Donald Trump’s eventual nominee to replace her.
Carlyle to Acquire Data Company TriNetX in Health-Care Drive
Brief: Carlyle Group Inc., the alternative asset manager overseeing $221 billion, is buying a majority stake in clinical data company TriNetX Inc. Equity capital for the investment came from the $18.5 billion private equity fund, Carlyle Partners VII, the company said Monday, declining to comment on deal terms. Closely held TriNetX has built a global network of research hospitals and academic institutions, biotechnology and drug companies, contract research organizations and other specialty data partners. Carlyle’s investment will help the company, founded in 2013, bring more technologies such as artificial intelligence and machine learning to researchers, according to Gadi Lachman, chief executive officer of Cambridge, Massachusetts-based TriNetX… The deal adds to Carlyle’s growth investments in the health-care industry. The firm said earlier this month it led a $175 million round for Grand Rounds. Carlyle also backed 1Life Healthcare Inc., the primary-care clinic chain that went public in January. Other deals have focused more broadly on technology…
Hedge Funds See Opportunity in Battered New York, San Francisco Apartment Markets
Brief: In the wake of the COVID-19 outbreak, as businesses across the country urged employees to work from home, rents plunged in New York City, San Francisco and other densely-populated cities. Still, prominent hedge funds, including D1 Capital Partners and Long Pond Capital and mutual fund giants Capital Group and T. Rowe Price, purchased shares in the second quarter in companies that rent residential real estate in urban markets, buying in at beaten-down levels and possibly betting on a faster rebound than Wall Street forecast. Now, nearly three months later, shares of real estate trusts that specialize in urban apartment rentals are down more than the broader real estate sector and the benchmark S&P 500 stock index for the year-to-date and since the March market rout. Shares of Equity Residential, founded by billionaire Sam Zell, are up 7% since the March low, AvalonBay Communities, which owns the Avalon Morningside Park with views of Manhattan, and UDR are up 26% and 14%, respectively, while the S&P 500 is up 48%. “The next three to five years are going to be very challenging,” said Jonathan Litt, whose hedge fund Land & Buildings Investment Management concentrates on real estate. “The key is to stay alive until 2025 in these markets.”
Hedge Funds Wanted After Investors Lose Complacency
Brief: Hedge fund managers that have successfully navigated their way through the first half of this year and are producing good returns are in demand by institutional investors that are adding more hedge fund exposure to their portfolios and/or are upgrading lackluster managers with better choices. "There's a sense of optimism from hedge fund managers, backed up by investors," said Thomas P. Kehoe, managing director and global head of research and communications for the London-based Alternative Investment Management Association. "More investors are interested in hedge funds, and are seeing a real tool they can latch on to in this difficult environment for preserving capital, managing volatility, mitigating risk and producing returns," Mr. Kehoe said. In fact, high volatility in the first quarter this year was the catalyst for investors to consider more investment in hedge funds, said Kenneth J. Heinz, president of index provider Hedge Fund Research Inc., Chicago. "A year ago, institutional investors were very complacent. They aren't anymore because of ultra-high equity valuations. They're building out their hedge fund portfolios by putting the unallocated portion of their hedge fund target to work," Mr. Heinz said.
U.K. GDP Faces $14 Billion Impact from Closed U.S. Air Links
Brief: The closure of passenger air links between the U.S. and the U.K. will strip at least 11 billion pounds ($14.21 billion) off U.K. gross domestic product in 2020, according to a report commissioned by British Airways’ parent IAG SA, London’s Heathrow Airport, the Airlines U.K trade group and airport services firm Collinson Group. The authors called for the creation of city or state-based travel corridors between the U.S. and the U.K. as well as airport testing for Covid-19. Keeping the routes closed will cost the U.K. economy 32 million pounds a day by the beginning of October, according to the report. “Government inaction on aviation and its impact on Britain’s economy couldn’t be clearer,” British Airways Chief Executive Officer Alex Cruz said. “Ministers must reach agreement with their U.S. counterparts on a testing regime that minimizes quarantine and permits regional travel corridors to re-open the U.K.-U.S. market.” Airlines have been campaigning to lift restrictions on trans-Atlantic travel which have been in place since early March. New York to London is BA’s most profitable route, with business travel a key driver of demand. The route generated about 7 million seat sales last year. The U.S. is the single biggest source of visitors to the U.K., with almost 4 million people visiting annually, according to the report.
