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Our briefing for Tuesday May 26, 2020:
May 26, 2020 3:50:06 PM
- In the United States, New York governor Andrew Cuomo rang the opening bell at the New York Stock Exchange (NYSE) for the first time after a two-month shutdown due to the coronavirus pandemic. The NYSE in its current form is only partially reopened with roughly 100 brokers on the floor, most of those from small firms dependant on the physical space the NYSE provides. Traders were prohibited from using public transport to get to work, required to sign papers indemnifying the NYSE if they catch the coronavirus and follow the exchange’s health regulations.
- Anger. Sadness. Frustration. These were the words used by Canadian Prime Minister Justin Trudeau after the military acted as a whistleblower signifying “extremely troubling” cases of elder abuse in Ontario long-term facilities they were called into help. The CBC is citing sources on details from the report that include residents going unbathed for weeks, cockroaches, and cases of Covid-19 patients roaming the hallways of the facilities. An emotional Ontario Premier Doug Ford called the long-term care system in the province “broken” and that his government was determined to fix it. It is unclear if similar abuse allegations were made as well by military officials at the Quebec nursing homes they were called into help with, although local media in the province has called attention to similar circumstances.
- United Kingdom Prime Minister Boris Johnson’s government continues to come to the defence of his chief advisor. During a news briefing on Tuesday, health minister Matt Hancock said Dominic Cummings acted “within the guidelines” issued by the government when he traveled to northern England during the coronavirus lockdown. Hancock said the trip was considered of exceptional circumstances due to childcare purposes. A poll has 60% of UK citizens believing Cummings should resign, but Prime Minister Johnson refuses to fire him, and Cummings refuses to quit.
- Germany’s government, along with state premiers have agreed to extend social distancing guidelines until June 29 to help continue curb the spread of the coronavirus. The government has also agreed to a €9 billion deal with airline company Lufthansa to save it from economic collapse. The German government will take a 20% stake in the firm, which it intends to sell by the end of 2023. The deal now needs to be approved by the firm’s shareholders and the European Commission.
- Dubai will raise the number of people allowed into shopping centres, offices and restaurants as of Wednesday. Businesses will be allowed to increase the number of employees going into offices to 50% (up from 30%). Shopping centres will be able to operate at 70% capacity (up from 30%) and cinemas closed from late March, can reopen allocating two seats per customer, leaving space horizontally and vertically.
- Philippine President Rodrigo Duterte said during a televised address on Monday that students will not return back to school until a vaccine is available. Public school normally runs from June to April in the Philippines, but the start of the school year was pushed back to August 24th due to the coronavirus.
- According to Chinese state media, the city of Wuhan has conducted more than 6.5 million coronavirus tests in just nine days. The ambitious city-wide plan to test all of its 11 million citizens is to prevent a second wave of the coronavirus as Wuhan represented ground zero of the global pandemic.
Covid-19 – Due Diligence And Asset Management
Hedge Funds Plan Extreme Lengths to Protect Stars After Lockdown
Brief: One hedge fund may shut an office in Asia permanently and have employees work from home. Another may dramatically shrink its Manhattan headquarters. Meanwhile, industry titan Millennium Management has a 50-point checklist for reopening offices that includes air filtration and an application process for staff who want to come in. Around town, rivals are discussing procuring infrared temperature scanners for entryways and plexiglass dividers to slide between desks. If Wall Street’s big banks are adopting off-the-rack approaches to reopening skyscrapers to armies of employees, the asset management industry’s solutions are much more bespoke. Interviews with almost a dozen industry players show their plans are idiosyncratic and may go to new extremes. It reflects their need to protect star traders at any cost, but also the reality that they have less control over buildings shared with other tenants.
Asset Managers Forced to Disclose Pandemic Failures Under New Stewardship Code
Brief: Asset managers will have to explain how they ignored the risk to their investments posed by a pandemic like Covid-19, under the new UK Stewardship Code that came into force this year. BlackRock, Fidelity International, Standard Life Aberdeen, Schroders and Legal & General Investment Management are among the leading companies that say they did not raise pandemic risk in discussions with companies or take it into account in investment decisions. Under the new code, asset managers are required to publish a report detailing “how they have identified and responded to market-wide and systemic risks” and “how they aligned their investments accordingly”. Even though the new code applies only from the start of the year, the Financial Reporting Council, the regulator that oversees the code, says that companies will be expected to say whether they took any account of pandemic risk before the outbreak.
Hedge Funds Target France as Short-Selling Bans Lifted
Brief: A cluster of big name hedge funds have started betting against French companies, moving in after the lifting of a short-selling ban imposed earlier this year to calm financial markets, an analysis of regulatory filings showed. France joined Italy, Spain, Belgium, Austria and Greece in dropping short-selling bans last week. They had banned the practice for many stocks two months ago to curb extreme stock market volatility caused by economic uncertainty that has resulted from the coronavirus lockdowns. Hedge funds engage in so-called “short-selling” by borrowing a stock from an institutional investor, such as a pension fund, and selling it back when the shares fall, pocketing the profit… Citadel, Marshall Wace and Millennium are among hedge funds that have taken out short positions on French companies over the past week, with Peugeot (PEUP.PA) and Air France-KLM (AIRF.PA) among the most prominent targets. British hedge fund Sandbar Asset Management took the opportunity to double its short position in Air France to 1.2% of the company’s equity capital on May 20, from 0.6% on March 17.
Rich Chinese Investors Snapping up Luxury Homes from Singapore to Sydney
Brief: Rich Chinese investors are finding luxury real estate is a good hiding place from the economic fallout of the coronavirus. Across China and in some of their familiar hunting grounds in Asia, wealthy buyers are snapping up top-end housing, in many cases to guard their wealth against anticipated inflation and a weakening yuan. The rush to add real estate has led to a jump in upmarket housing prices in China, while offering some support for Asian property markets hit hard by the pandemic. "It's been flat-out," said Monika Tu, founder of Black Diamondz, an Australian company that caters to Chinese buyers of luxury real estate. Since March, Tu has sold A$85 million (S$79.3 million) of prime property, with about half the sales to Chinese clients who were in Australia when the pandemic hit. That's a 25 per cent jump from earlier in the year. The homes, priced between A$7.25 million and A$19.5 million, are all in Sydney's well-heeled, ocean-front suburbs such as Point Piper.
Armed with Whistleblower Tips, U.S. SEC Cracks Down on Coronavirus Misconduct
Brief: The novel coronavirus outbreak and economic fallout is proving to be a bonanza for whistleblower lawyers as the U.S. securities regulator cracks down on a range of related misconduct from companies touting sham cures to misuse of federal aid. The Securities and Exchange Commission (SEC) fielded about 4,000 complaints from mid-March to mid-May, a 35% increase on the year-ago period, Steven Peikin, the agency’s co-head of enforcement, said this month as cases of COVID-19, the respiratory illness caused by the coronavirus, shot up… Getnick said a broad range of misconduct related to the COVID-19 outbreak, such as loan fraud, price-gouging, counterfeit or substandard medical goods, or healthcare fraud, could potentially find their way into the SEC’s remit, due to the breadth of U.S. securities law.
Only a Few Hedge Funds Made Money in March and April: Here’s How
Brief: Father-of-six Nicolas Bryon didn’t get much sleep in March but it wasn’t family duties keeping him up. As global markets crashed, the Sydney-based hedge-fund manager rose every hour to check on his positions and execute trades. After weeks of broken sleep, his Atlantic Pacific Australian Equity Fund was up 23.6% for March and April, making it one of the rare hedge funds globally that made money in both periods. The two wildly different months messed with even some of the biggest money managers. In March, several bears reaped fortunes by betting on falling markets, only to lose money in April when government stimulus revived stocks. Globally, just 13% of hedge funds made money in both months, according to data compiled by Bloomberg. A number of those that did exhibited similar traits: an ability to trade across different geographies or asset classes and a hyper-vigilance toward monitoring positions.
