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Our briefing for Thursday October 1, 2020:
Oct 1, 2020 3:00:55 PM
- In the United States, one of the drug companies pegged with developing a COVID-19 vaccine dealt a blow to President Donald Trump’s plan of having it ready before the elections in November. In a Financial Times interview, Stephane Bancel, the chief executive of Moderna Therapeutics said his company would not be able to apply for authorization of a vaccine until at least late November. Bancel also added he didn’t expect Moderna to have full approval to distribute the drug to all sections of the population until next spring. The news comes in direct conflict to what President Trump said during a contentious debate earlier in the week in which he said a vaccine would be ready “a lot sooner”.
- During a news conference on Thursday, Canadian Prime Minister Justin Trudeau announced his government’s plan to spend $10 billion on infrastructure initiatives. The money will go towards projects such as broadband, clean energy and agriculture and is part of a plan to also add one million jobs to an economy left reeling due to the coronavirus pandemic. Elsewhere in the country, Quebec’s two major cities – Montreal & Quebec City – along with one other region are now under the province’s strictest COVID-19 restrictions. The “red” zone includes restrictions on home gatherings and closures of bars and restaurants until October 28th. The police will also be on higher alert in those areas, issuing fines up to $1,000 to those who don’t comply and will have access to obtain warrants faster to crackdown on potential house parties.
- In the United Kingdom, recent data from the country’s test and trace program revealed a 60% increase in positive COVID-19 cases over the past week. The latest figures show 31,373 people tested positive during the week of September 17th. During the same time period, close to 30,000 people were transferred to the contact tracing system and of those, only 71.3% were reached and asked to provide information about their contacts, down from close to 81% the week earlier. The numbers need to be in the 80% range for the test and trace program to be deemed effective.
- Germany is planning to move ahead with a law that will give its citizens the legal right to work from home. The announcement was made by the country’s labour minister with the draft law to be published in a few weeks time. The goal is to ensure workers have the option of working from home when possible, as well to regulate home office work, such as limiting hours. COVID-19 has made many employers and employees reconsider office life, forcing many into a mass experiment of mobile work.
- In Spain, 19 regions including Madrid, will have two days to implement a national order that will limit social gatherings, shops’ opening hours and restrict trips in and out of any large cities. Madrid will carry out the order, but its regional president said she will fight the Spanish government’s resolution in the courts because she deems it arbitrary.
- In Turkey, the country’s health minister admitted to publishing only a partial tally of confirmed coronavirus infections, which now brings into question the true scale of the pandemic in the country. In July, as countries were reopening their borders around them and rebooting their tourism industry, Turkey changed the way it reported its coronavirus cases, replacing the words “today’s number of cases” to “today’s number of patients”. The changing of the wording meant “patients” were considered people who tested positive and displayed symptoms. Those who tested positive but were asymptomatic were not included in the tally. The World Health Organization (WHO) defines confirmed cases as the following: “a person with laboratory confirmation of COVID-19 infection, irrespective of clinical signs and symptoms.”
Covid-19 – Due Diligence And Asset Management
Private Equity Firms Bet on Booming Demand for Online Shopping
Brief: Private equity firms are betting that the rise in online shopping is here to stay, with some of the world’s biggest investment funds eyeing deals for everything from warehouses to delivery companies. Clipper Logistics Plc, which supports the e-commerce operations of retailers from Asos Plc to Superdry, is attracting interest from buyout firms, people with knowledge of the matter said. Cinven is among potential suitors that have been evaluating the 496 million-pound ($638 million) company, while CVC Capital Partners has also looked in the past, according to the people, who asked not to be identified because the information is private. Silver Lake recently participated in a $650 million funding round for Klarna AB, which lets shoppers pay for online purchases in installments. In August, Advent International acquired a controlling stake in the U.K. operations of package delivery service Hermes. The coronavirus crisis has created rising e-commerce demand, with customers stuck indoors ordering everything from food delivery to clothing and items for home improvement. That’s attracted private equity firms, which are eager to spend the record piles of capital they’ve amassed even as they grapple with the effects of Covid-19 on the companies they already own. Permira led a $300 million funding round last month for Mirakl, the French startup behind a platform used to create digital marketplaces, while Warburg Pincus invested in Boston-based Salsify Inc., which helps brands manage their online presence.
Goldman Job Cuts Drive 2020 Global Bank Cull Toward 70,000
Brief: The global cull of banking jobs continues with Goldman Sachs Group Inc. joining the growing list of lenders resuming cuts paused during the coronavirus pandemic. The Wall Street firm is embarking on a plan to eliminate about one per cent of its workforce, or roughly 400 positions, according to people with knowledge of the matter, who asked not to be identified as the information isn’t public. Adding that to disclosures this week by other banks would take the total announced this year to 67,844, according to figures compiled by Bloomberg. More than 30 lenders -- from Europe, North America, Asia and Africa -- are behind the planned reductions. The actual total is probably higher because many banks eliminate staff without disclosing their plans. The banks cited a need to reduce expenses to offset the cost of credit souring during the pandemic as well as spending to comply with stricter regulation and invest in digital technology. Goldman’s plans suggest that the pandemic is outlasting the financial industry’s resolve to offer jittery employees stability through the economic downturn. They add to a bad week for banking jobs. Italy’s Intesa Sanpaolo SpA said on Wednesday that it agreed with trade unions on at least 5,000 voluntary job reductions. Banco de Sabadell SA’s U.K. unit said this week it will eliminate more than 900 roles.
Big U.S. Banks to Report Profit Plunge as Pandemic Recession Takes Hold
Brief: As big U.S. commercial banks close their books on the third quarter, analysts expect them to report a 30% to 60% plunge in profits on the year-ago period due to the pandemic-induced recession and near record low interest rates. That slump in third quarter net income comes even though lenders are not going to make outsized provisions for expected loan losses as they did in the first and second quarters. And, while capital markets and investment banking revenue is expected to be up from 5% to 20%, that won’t be enough to make up for the decline in interest income from loans and securities. “You have soft loan growth and you’re still feeling the impact from aggressive Fed actions earlier this year,” said analyst Jason Goldberg of Barclays. Citigroup IncC.N and Wells Fargo & CoWFC.N, the third- and fourth-biggest U.S. banks by assets respectively, will report net income down by about 60%, according to I/B/E/S analyst survey data from Refinitiv.
Private Capital Overwhelmingly Expects Economic Rebound in 2021, but Braces for Second Wave of COVID-19
Brief: Private equity and venture capital fund managers are anticipating the economy will improve in 2021 but are actively preparing for the impact of a second wave of the pandemic, according to BDO’s Private Capital Pulse Survey. Three-quarters (74.5%) of all fund managers surveyed expect the economy to improve next year—28% expect it to be “much better” and 46.5% “slightly better.” Only 15.5% of PE and VC fund managers surveyed said they expect the economy to perform worse in 2021, and the remainder, 10%, said the economy would fare about the same. At the same time, PE and VC fund managers are preparing for a potential second wave of the coronavirus in various ways: by conducting a business continuity risk assessment (55%), by making changes in forward-looking valuation metrics (47%), by activating a crisis response task force (39.5%), by considering applying for a government loan (36.5%), and by assessing EBITDA for asset impairments (32%). Just 4.5% of respondents say they are not doing anything to prepare for a second wave.
Heirs to Asian Fortunes Tested on Sustainability Commitments by Pandemic
Brief: As markets tumbled this year, Mary Ann Tsao faced a tough choice. Her fourth-generation family office in Singapore had adopted sustainable investing principles, but the coronavirus was trashing the global economy. Relatives suggested a return to the old ways. "They'd say 'don't lose any money - never mind about the ESG (environmental, social and corporate governance)','" she said. "But we have to ask: what is the purpose of investing money in the first place?" In a sign of how Asia's ultra-rich family offices are slowly embracing the sustainability trend, the Tsao Family Office has tried to stay the course, buying into the Brown Advisory US Sustainable Growth Fund and adding to its investment in the Robeco Sustainable European Stars Fund after the pandemic began. For sustainable investing to take hold in Asia as it's started to in Europe and North America, family offices like Tsao's are key. Families run 85 per cent of the businesses in Asia, according to Ernst & Young estimates, a much higher proportion than the rest of the world. As fortunes get passed on to next generations, the push to do well by doing good is gathering steam.
BlackRock Unlocks £3.1 Billion British Property Fund from COVID Freeze
Brief: BlackRock BLK.N said on Wednesday it had lifted the suspension of its 3.1 billion pound ($4 billion) British property fund, one of several to resume dealings after a six-month freeze due to uncertainty about valuations. Much of Britain’s 70-billion-pound ($90 billion) property fund sector was frozen in March as a result of the COVID-19 pandemic, but surveyors lifted an uncertainty warning earlier this month. Dealing in the BlackRock fund, which was suspended on March 20, will start again on Oct. 30, the U.S. asset manager said in a statement emailed to Reuters, as the fund’s assets were no longer subject to “material uncertainty”. “The fund has sufficient liquidity to meet the current level of redemption requests,” the statement said. Legal & General LGEN.L, Royal London, St James's Place SJP.L and Columbia Threadneedle have also lifted the suspension of their funds. Aegon AEGN.AS, Aviva AV.L, Janus Henderson JHG.N and Standard Life Aberdeen SLA.L said on Wednesday theirs remained suspended. Some funds have said they are checking market activity, redemption queues and cash levels before reopening.
