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Our briefing for Tuesday April 28, 2020:
Apr 28, 2020 3:38:59 PM
- United States President Donald Trump plans to sign an executive order and use the Defense Protection Act to ensure order meat-processing plants remain open. The order will affect many processing plants supplying beef, chicken, eggs and pork. In recent weeks, American meat producers have been hit with mass coronavirus outbreaks at their plants, which has caused a stalemate between the owners wanting to keep running and labour unions wanting more protection. President Trump’s order will declare the plants critical infrastructure and the government will look to provide workers with protective gear.
- In Canada, the province of Quebec rolled out more plans for reopening their province on Tuesday. Premier Francois Legault announced stores that aren’t in shopping malls, construction, civil engineering and manufacturing businesses will be allowed to reopen in May. The Premier stressed reopening certain parts of the economy doesn’t mean physical distancing measures will be dropped.
- The United Kingdom have called on the technical director of the National Cyber Security Centre to advise the government on how to secure the National Health Service’s (NHS) contact tracing app. Once the UK’s lockdown restrictions eventually ease, the tracing app will be used to inform people whether they have been in contact with someone with coronavirus and advise quarantine guidelines for those at risk. Privacy advocates have raised concerns over the idea the government using the app to collect other sensitive health data on its citizens.
- France’s Prime Minister Edouard Philippe has outlined the country’s plans to ease lockdown restrictions as of May 11th. Businesses will be allowed to reopen, except for restaurants, cafes and other large meeting areas such as museums and cinemas. Public transit will be restored to 70% of its normal services with businesses encouraged to stagger working hours to avoid overcrowding and encourage working from home wherever possible. Finally, schools will be allowed to reopen progressively, starting with nurseries and primary schools, with a limit of 15 children per class. The lockdown being lifted on May 11th for France will depend on new daily cases dropping below 3,000. If not, the lockdown will continue.
- Spain plans to transition out of its coronavirus lockdown in four stages that will hopefully take place over the next two months. Speaking to the nation on Tuesday, Prime Minister Pedro Sanchez noted the timeline will depend on if the virus flares up again and will vary by province. Prime Minister Sanchez said mainland Spain would enter the first phase of transition on May 11th with hotels and restaurants operating at 30% capacity.
- Brazil seems to be buckling under the pressure of the coronavirus and may be emerging as the world’s next hot spot. Medical officials in Rio de Janeiro and at least four other major cities in the country have warned their medical systems are on the verge of collapse. It doesn’t help matters that President Jair Bolsonaro recently fired his health minister and replaced him with an advocate that is on his side for reopening the economy. Almost all Brazilian states have stay-at-home measures in place, some extending until mid-May.
Covid-19 – Due Diligence And Asset Management
Blackstone says Coronavirus Crisis Could Derail NIBC Deal
Brief: Private equity firm Blackstone said on Tuesday its proposed 1.36 billion euro ($1.47 billion) takeover of NIBC Holding NV might not win regulatory approval, sending shares in the Dutch bank 12% lower. “There is substantial uncertainty concerning the business plan and it continuing to be a realistic basis for obtaining regulatory clearance,” Blackstone said. “The relevant regulators have not yet given any indication of their views in this respect.” NIBC shares traded down 12% at 0900 GMT in Amsterdam. Blackstone also warned that NIBC’s decision to postpone its dividend payments meant it could no longer guarantee the financing of the deal. NIBC this month decided to postpone dividend payments at least until the second half of the year, as European banks came under pressure to improve their capital positions to be able to weather losses caused by the coronavirus pandemic.
A 3.6 Billion Manager Dumps Risk on Bet Crisis is Getting Worse
Brief: The investment chief of Veritas Pension Insurance Co. says he doesn’t understand why there are glimmers of hope in equity markets, as he sells stocks and buys government bonds to protect his portfolio. “There is a lot of optimism at the moment in the equity market that the crisis will soon be over, but I don’t believe it will,” said Kari Vatanen, who oversees 3.3 billion euros ($3.6 billion) as chief investment officer of Veritas in Finland. “In the real economy, we are going to see data getting worse, week after week.” Vatanen, who spoke after delivering first-quarter results that showed a 10% loss due to the rout triggered by Covid-19, says he’s been busy cutting risk in his portfolio since he started last month.
HSBC sees Mounting Credit Losses After Pandemic Halves First-Quarter Profit
Brief: HSBC Holdings PLC (HSBA.L) on Tuesday warned of more earnings pain ahead after first-quarter profit nearly halved as it set aside a hefty $3 billion in bad loan provisions due to the coronavirus pandemic. Europe’s biggest bank said the outbreak would mean sustained pressure on its revenues as customer activity declined and lower interest rates squeezed margins, while noting increased fraudulent activity could lead to “potentially significant” credit losses. The bleak outlook, shared by many lenders reporting earnings this season, underscored the scale of the problems facing the sector as it grapples with corporate borrowers in crisis, plunging stock and oil prices, as well as low interest rates. HSBC’s new Chief Executive Officer Noel Quinn faces additional hurdles as plans to cut costs through layoffs - part of a wider restructuring unveiled in February - have been put on hold due to the pandemic.
Wealth Revamp Helps UBS to 40% Net Profit Rise in First Quarter
Brief: The world’s largest wealth manager, UBS (UBSG.S), reported a 40% rise in quarterly profit on Tuesday, with its core business enjoying its best three months since 2008, thanks to a restructure and rich clients reshuffling portfolios to respond to the coronavirus outbreak. The bank booked net profit of $1.595 billion, slightly ahead of its previous guidance of around $1.5 billion. It reported strong operating growth across all but one of its business divisions, even after accounting for the risk of increased defaults resulting from the virus. “This quarter, I can comfortably say, you saw UBS at its best,” Chief Executive Sergio Ermotti said on a call to analysts and journalists, sounding a confident note on the bank’s preparedness as it braces for headwinds from a fall in asset valuations, sinking interest rates and a slowdown from bumper client activity levels.
Investors Should Brace for a ‘Great Repression’ That Will Make Past Downturns Look Tame, Economist says
Brief: The economic aftermath of the 2008 financial crisis was so tepid it was referred to as the “Great Recession”. In the wake of the coronavirus catastrophe, investors need to brace for the “Great Repression”, which may be even uglier than the downturn of a decade ago. That is the takeaway from an analysis out on 27 April from economist David Rosenberg. Rosenberg is often considered a “perma-bear”, but that is not entirely fair. He has had his optimistic spurts. This just isn’t one of them. In the “base case” for the US economy, published by his firm, Rosenberg Research, the economy “reopens” in May, in a staggered approach across industries and regions. There are “periodic setbacks in terms of COVID-19 case counts…sufficient to make people less comfortable and confident about spending then they did prior to the crisis. A vaccine is not developed in this forecast, but treatment that alleviates the worst respiratory symptoms” is developed within the next six months, he writes.
MFS Closes Energy Fund After Assets Drop to $2M
Brief: MFS Investment Management has closed its global energy fund after assets dropped to around $2m with limited prospect of further growth, Citywire Selector has learned.The specialist fund, which was formally called theMFS Meridian Funds – Global Energyfund, was overseen by James Neale. It was officially liquidated on 15 April 2020. MFS IM wrote to investors at the end of February about its plans to close the fund when it had around $6.8m in assets under management. It originally launched the strategy as a Luxembourg-domiciled fund in February 2009. In a short statement toCitywire Selector, a spokesperson for MFS IM said: ‘As MFS does not believe the fund will grow to a viable size, we believe that liquidation best serves the interests of Funds shareholders. The liquidation took place on the 15 April 2020.’
