Brief : When countries went into lockdown to stop transmission of the coronavirus, travel— particularly business travel — took a brutal hit. And though demand for travel is slowly picking up as the country heads into the summer, business travel will still face an excruciating uphill struggle, according to a new Barclays report. "Global business travel — especially long haul — will likely be among the last markets to recover," Barclays economists wrote in a special report on May 25. "Companies were quick to halt international travel as the pandemic struck, and businesses will also be careful when it comes to restarting travel for work purposes." Pre-pandemic, business tourism-related spending accounted for 21.4% of the global travel and tourism industry in 2019, with bigger contributions in countries like Canada, Japan, the United Kingdom, and the U.S., the authors stated. Business tourism contributed to 1.5% of global GDP, and had been growing at an average of 3.6% over the last five years, they added, with the U.S. and China accounting for nearly 45% of all global business travel. But between April and the end of December 2020, global spending on business travel fell 68% and is estimated to have fallen more than 50% year-over-year. (In contrast, in 2001, business travel fell around 11%; in 2009, it fell around 7.5%).
Brief: Markets are paying less attention to geopolitical risks as focus has shifted to inflation prospects and economic restarts, according to BlackRock Investment Institute. The research arm of the world’s largest asset manager said in a note on Monday that its Geopolitical Risk Indicator is currently at a four-year low, signalling below-average attention on geopolitics. “We believe this is justified, as investors appear more focused on the economic restart and inflation outlook and less concerned about geopolitics since the change in US administration,” write BlackRock’s analysts. “Yet it’s worth watching specific risks as flare-ups can catch investors off guard when attention is low.” Risks including US-China strategic competition, Covid-19 resurgence and Gulf tensions have receded in the minds of investors over the past year, write the analysts. BlackRock’s Geopolitical Risk Indicator ranks the top 10 geopolitical risks, based on mentions of different geopolitical risks in brokerage reports and financial news stories, coupled with the firm’s model for the potential impact on global assets from specific geopolitical events. Two of these risks, a global technology decoupling and a major cyber-attack, remain ‘high’, according to BlackRock.
Brief: Emerging-market nations’ struggle to claw out of the pandemic-induced economic crisis can spill over to hurt the developed world, which should be doing all it can to ensure better access to vaccines and a more equitable recovery, the head of the International Monetary Fund said. Poorer nations are faced with the risk of interest rates increasing while their economies aren’t growing, and may find themselves “really strangled” to service debt, especially if it’s dollar-denominated, Managing Director Kristalina Georgieva said Tuesday in a virtual event hosted by the Washington Post. “That is not only danger for them, it is a danger for global supply chains, it’s a danger for investor confidence -- in other words, it has a ricochet impact on advanced economies,” she said. “Closing our eyes to this divergence can harm not only those countries and their people, which is bad enough, but it can harm the global recovery and it can harm investor sentiment in a way that we see to be significant and requiring very close attention.” Measures taken to stimulate the U.S. economy are, on balance, translating into “good news” for other countries because of the spillover effect of demand, the IMF chief said.
Brief: The number of acquisitions made by private equity backed businesses in the UK hit record levels in the first quarter of 2021, with 168 transactions completed in just three months, according to Rickitt Mitchell’s Buy and Build Barometer. The latest analysis from the corporate finance firm, conducted in partnership with Experian Market iQ, reveals an 85 per cent rise in the figures seen in the corresponding quarter last year. Q1 2020 saw 91 deals completed, prior to the first Covid-19 lockdown, with the latest figures nearly triple the 57 deals in Q1 2019. On a local level, the majority of regions saw a significant boom in activity. The South West saw the highest number of transactions, with 18 deals completed in the first quarter. This was followed closely by London and the East of England (both 17), the South East (16), with the North West the first of the Northern regions with 11 bolt-on deals in this period. This was also the third successive quarter that transactions hit triple figures, with the GBP980 million value in Q1 2021 also the highest levels for a quarter since the end of 2018.
Brief: Whistleblowing reports to the FCA dropped by 9 per cent between 2019 and 2020, likely because the majority of the UK’s workforce left the office and operated remotely, according to new research from Kroll, a provider of services and digital products related to governance, risk and transparency. Data obtained by Kroll from the FCA under Freedom of Information Act shows that there were 1,073 whistleblower reports to the FCA last year, down from 1,179 in 2019. Anonymous reports experienced a larger drop of 29 per cent, with just 206 reports compared to 291 in 2019. This is the first year-on-year fall since 2016, with steady growth in reports between then and 2019. Last year brought significant disruption to working patterns across the world, and the majority of UK financial services teams worked from home for most of 2020. It is likely that home working also increased isolation and limited accidental discovery of questionable and illicit business practices.
Brief: Even as India is attracting all the global attention for the worst virus outbreak, the pandemic has done little to dent the confidence of overseas investors who are betting on a strong rebound. BlackRock Inc. plans to use any weakness in the rupee to add to a modest long position while GW&K Investment Management LLC is boosting its stock holdings following a recent selloff. Invesco Hong Kong Ltd. and Lombard Odier favor debt linked to India’s sustainable investing and renewable energy sectors. Portfolio managers are attempting to navigate India’s pandemic by focusing on the nation’s long-term growth prospects, with consumption expected to drive a recovery once the virus crisis passes. While the outbreak has fueled the world’s worst health crisis, limited stock outflows and a rebound in the currency attest to investors’ confidence in the South Asian economy. “Economic growth will be tempered by the second wave in 2021, but growth will be strong this year and the long-term outlook is quite positive,” said Tom Masi and Nuno Fernandes, co-portfolio managers at GW&K Investment Management. “Short-term investors will be compelled to step aside, but long-term oriented investors understand the opportunity.”