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Our briefing for Thursday May 6, 2021:
May 6, 2021 3:57:33 PM
- In the United States, New York City Mayor Bill de Blasio announced the intention to offer the Johnson & Johnson COVID-19 vaccine to any tourist that visits in a bid to boost tourism upon reopening. Mayor de Blasio said the city needs state approval to vaccinate non-New Yorkers, but plan to begin the process as soon as if/when they are granted that approval. The plan would be to install mobile COVID-19 vaccination units in various tourist attractions across the city such as Times Square, Brooklyn Bridge Park and the Highline.
- In Canada, health experts in Ontario believe the province won’t be able to break out of its stay-at-home order on May 20th as the case count is still too high. On Thursday, Ontario reported 3,424 new cases, although the number of patients in hospital and intensive care on ventilators dropped for the first time in weeks. Health experts say lessons need to be learned from previous lockdowns and dates shouldn’t be used for when specific orders should end, instead case count rates. For instance, one health expert said new COVID-19 cases need to drop significantly to below a rate of 20 per 100,000 per week. As of May 1st, Ontario’s rate was 166.6.
- The Bank of England is looking extremely optimistic on the outlook of the United Kingdom economy – expecting the biggest surge in household spending since 1988. Central bank officials, led by Governor Andrew Bailey, said they expect consumers to use up 10% of the savings they incurred while in lockdown, double the pace of what was previously forecasted. The central bank also sees the UK’s economic output recouping their losses by year’s end, instead of sometime early in 2022. The success of the UK’s vaccination campaign has driven down case numbers and death rates to allow the government to stay on track with full reopening of the economy thus far, with the last stage set to take place in June.
- In Germany, Chancellor Angela Merkel has pushed back against the United States and the Biden’s Administration’s proposal to waive patent protections for COVID-19 vaccines. A German government spokeswoman said Thursday via email that America’s plan would create “severe complications” for the productions of vaccines. “The limiting factor for the production of vaccines are manufacturing capacities and high quality standards, not patents, “said the German government spokeswoman. The United States, Germany and other countries will take up the debate via the World Trade Organization but given Germany’s stance it is looking unlikely the American proposal will be pushed through as all 164 WTO members must agree on the decision to waive patent protections.
- The Associated Press is reporting the sales of Dubai’s upscale properties soared 230% in the first quarter of 2021, compared to the same period last year. A record-breaking 90 properties, worth at least 2.7 million USD each, changed hands in April, beating the 84 sales the month before. Only 54 such transactions occurred in 2020. “Tons of people are coming in and buying multimillion dollar properties on the spot, with no due diligence time whatsoever,” said Matthew Cooke, a partner at consultancy Knight Frank. Outside of a tourist influx surge in cases in January, the United Arab Emirates and Dubai have fared out relatively well with its young population and low mortality rates and has positioned itself as the world’s pandemic-friendly vacation spot.
- Australia has reinstated COVID-19 restrictions in the Sydney area after a mysterious new case appeared. As mentioned in Castle Hall’s Wednesday COVID-19 briefing, a man in his 50s became the first reported local transmission case in New South Wales in more than a month. Further testing has determined the man was infected with the variant first discovered in India and genomic sequencing had linked the case to a returned traveller from the United States, but with no clear transmission path between the two people. The case has baffled local health officials. As a result of the new case, New Zealand has halted quarantine-free travel to and from New South Wales while authorities investigate further. The New Zealand-Australia travel bubble had opened less than a month ago.
Covid-19 – Due Diligence And Asset Management
Vendors Get Tough With U.S. Retailers After Big Losses
Brief : As U.S. retailers celebrate a boom lifting one of the pandemic’s hardest-hit sectors, scars left by a year of bankruptcies and delayed vendor payments could threaten to undermine their recovery -- just as the crucial back-to-school shopping season begins. After watching their receivables mount last year, vendors of apparel and other goods demanded change. In order to ship, many began requiring payment upon delivery of the goods or even in advance, according to people with knowledge of the demands, which were made of distressed and healthy clients alike. For merchants, that’s a big cash drain at a time of great uncertainty. The shift comes after retailers spent much of last year delaying payments to preserve cash. Such maneuvers have long been used by struggling chains, but amid the pandemic, even more stable merchants like Macy’s Inc. and Gap Inc. followed suit. An analysis of company financial data showed such buyers took at least two weeks longer to pay their suppliers than the same period the prior year. Vendors are “shell-shocked” after a string of Covid-era bankruptcies left them with large losses, and more concerned about guaranteeing they’ll be paid, said Perry Mandarino, head of restructuring and investment banking at B. Riley. “Late payments are not being tolerated,” Mandarino said.
Covid, Cyber, Compliance and ESG Top Risk Concerns for Financial Services Sector, says New Allianz Report
Brief: Financial institutions and their directors have to navigate a rapidly changing world, marked by new and emerging risks driven by cyber exposures based on the sector’s reliance on technology, a growing burden of compliance, and the turbulence of Covid-19, according to a new report Financial Services Risk Trends: An Insurer’s Perspective from Allianz Global Corporate & Specialty (AGCS). At the same time, the behaviour and culture of financial institutions is under growing scrutiny from a wide range of stakeholders in areas such as sustainability, employment practices, diversity and inclusion and executive pay. “The financial services sector faces a period of heightened risks. Covid-19 has caused one of the largest ever shocks to the global economy, triggering unprecedented economic and fiscal stimulus and record levels of government debt,” says Paul Schiavone, Global Industry Solutions Director Financial Services at AGCS. “Despite an improved economic outlook, considerable uncertainty remains. The threat of economic and market volatility still lies ahead while the sector is also increasingly needing to focus on so-called ‘non-financial’ risks such as cyber resilience, management of third parties and supply chains, as well as the impact of climate change and other Environmental Social and Governance (ESG) trends.”
‘Significant Pushback’ Expected as Biden Backs Suspending Patents on Covid Vaccines
Brief: Many are predicting a bright future for biotech firms involved in the production of Covid-19 vaccines as they are rolled out across the globe, but US President Joe Biden’s proposal that vaccine producers should temporarily waive patent protection has dampened this rosy outlook and is likely to result in significant pushback from firms in the sector. On Wednesday (5 May), Biden announced his support for waiving intellectual property rights for Covid-19 vaccines, bowing to increasingly pressure from within his own administration and other nations to help the rollout of the vaccine in less developed countries, such as India and South Africa. The news sent some pharmaceutical stocks plummeting. Moderna's stock was down 6.2% to $163 following the announcement while the Novavax share price fell 5% to $172, though Pfizer's stock price dropped only slightly. Healthcare shares in China were also affected by the news, with the CSI Health Care index falling nearly 4% to 15,727 points. Industry experts speculate that the decision was prompted in no small measure by Pfizer's Q1 earnings update, announced the same day, where it revealed it had recorded vaccine sales of $3.5bn in the first quarter of the year and expects full year sales of $26bn. As Jim Wood-Smith, CIO private clients & head of research at Hawksmoor Investment Management puts it, this situation raises "profound moral and financial problems".
Sculptor Hedge Fund Rebounds With First Inflows Since 2014
Brief: Sculptor Capital Management’s flagship hedge fund is finally beginning to turn around. The firm’s multistrategy vehicle scored its first quarter of net inflows since 2014, marking the end of years of client withdrawals that totaled about $30 billion. The fund and its associated portfolios attracted a net $78 million of fresh cash, bringing total assets in those products to $10.9 billion as of March 31, the firm said in a statement Wednesday. The results, achieved in the last months of Chief Executive Officer Robert Shafir’s tenure, are a vindication of his promise and efforts to reverse the asset bleed. Last month, Chief Investment Officer Jimmy Levin succeeded him. Addressing the hedge fund inflows on Sculptor’s earnings call Thursday, Levin said that the new cash came from a broad range of investors. “It’s from all types of allocators all around the world: consultant-advised, non-consultant advised, institutional, non-institutional,” he said. “It’s been a bit of everything, which is why we described it as feeling healthy.”
SEC Chair Gary Gensler Hones in on Trading Behemoth Citadel
Brief: Citadel Securities’ outsize role in the capital markers has gotten the attention of regulators. Gary Gensler, the new chairman of the Securities and Exchange Commission, honed in on Citadel in prepared remarks to be delivered to a Thursday hearing of the House Financial Services Committee, which is looking into the GameStop trading fracas in January. The GameStop debacle resulted in sharp price hikes in so-called meme stocks, leading to restrictions on trading by broker dealers and resulting in losses among hedge funds and retail investors alike. In the process, the trading frenzy also raised questions about market structure and those who benefit from it. Citadel Securities, a market maker, emerged as a key player in January’s market events because of its acknowledged role in buying order flow from Robinhood, a retail trading app, whose customers sent GameStop shares temporarily soaring from $20 to $480. Payment for order flow is a controversial practice and has been banned in Canada and the U.K. In the U.S., Robinhood has already settled one SEC enforcement action on the practice.
