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Our briefing for Tuesday September 15, 2020:
Sep 15, 2020 3:14:02 PM
- In the United States, a 50-member group of House Democrats and Republicans have put together a $1.52 trillion stimulus plan. The dubbed “Problem Solvers Caucus” has been in development for weeks with the knowledge of the White House and leadership from both parties. However, this glimmer of hope for a solution doesn’t have a great track record as bipartisan groupings in the past haven’t been able to major broker major deals such as this. If this doesn’t work, American economists warn the US economic recovery is in danger of being weaker and more uneven as it tries to recover from the worst contraction since the second world war.
- In Canada, the province of Quebec is moving their largest city, Montreal from a level one (Green) to a level two (Yellow) as COVID-19 cases increase. Under the new alert level, activities are still allowed to take place in compliance with health rules, but with added enforcement and potential fines to make sure they are followed. As of Tuesday, the province had recorded more than 200 cases for six days in a row. Elsewhere in the country, Canadians are in no hurry to open the land border with the United States. According to a poll conducted at the end of last month, a survey of 1,000 Canadians showed 90% agreed with the current Canada-United States border closure to non-essential traffic.
- Last week, details were leaked about the United Kingdom’s plan for Operation Moonshot, a plan for mass coronavirus testing of up to ten million by early 2021. However, a group that represents hospitals in the country are complaining they can’t even keep up now due to a shortage of COVID-19 testing that could jeopardize efforts to stay ahead of a potential surge in the autumn. National Health Service providers said on Tuesday that inadequate testing is leading to increased absences in staff members as they are forced to self-isolate while they and their family members wait for test results. Home Secretary Priti Patel said this was “unacceptable” and “much more work needs to be undertaken with Public Health England.”
- Germany expects that no COVID-19 vaccine will be available for the wider population until at least the middle of 2021. The government’s research minister said safety must be the priority and that a vaccine will only be used on Germans when the benefit outweighs the risks. The German government has set aside £750 million to fund biotech firms working on COVID-19 vaccines, which will pay for clinical studies and preparation/distribution of vaccine inoculation.
- With India closing in on five million confirmed coronavirus cases, a snapshot of its returning government shows what the country is dealing with. At least 17 members of the Indian parliament have tested positive for COVID-19 as the lawmakers were screened ahead of the re-opening of parliament on Monday. Twelve of the 17 infected members of parliament were from the ruling Bharatiya Janata Party. All other MP’s cleared by tests wore masks, occupied seats with glass enclosures and worked shortened hours.
- Japan has named a new Prime Minister and his name is Yoshihide Suga. The 71-year old has served as the government’s chief cabinet secretary over the past eight years and will take over for Shinzo Abe, who is stepping down due to health reasons. Suga won in a landslide – taking 377 of the 534 votes (70.6%), which entitles him to serve out the remaining year of Abe’s three-year term. Suga could also decide to call a snap election to form a more durable administration and work on the recovery of the world’s third largest economy and help continue its battle against the COVID-19 pandemic.
Covid-19 – Due Diligence And Asset Management
JPMorgan Sends Some Traders Home After Worker Contracts Covid-19
Brief: JPMorgan Chase & Co. sent some of its Manhattan workers home this week after an employee in equities trading tested positive for Covid-19, according to a person with knowledge of the matter. News of the infection, on the fifth floor of the company’s 383 Madison Ave. building, was communicated to employees on Sept. 13, said the person, who asked not to be identified discussing information that isn’t public. That was less than a week after more workers began returning to offices after the Labor Day holiday, and just days after the biggest U.S. bank told senior traders they’d be required to return by Sept. 21. The case shows the challenges banks face as they try to bring more staff back to the office after months of remote work. JPMorgan has been among the boldest banks in calling workers back, and Chief Executive Officer Jamie Dimon spoke earlier Tuesday about his concerns that extended work-from-home could have its own consequences.
Jamie Dimon Sees Long-Term Damage if People Don’t Get Back to Work
Brief: Jamie Dimon says it’s time to get people back to work. The JPMorgan Chase & Co. chief executive officer, who’s been going into the bank’s offices since June, said he sees economic and social damage from a longer stretch of working-from-home. Governments should be focused on cautiously reopening cities, learning from earlier mistakes made in hasty attempts. “Going back to work is a good thing,” Dimon said in a virtual panel discussion at the Singapore Summit. It makes sense to “carefully open up and see if we can get the economy growing for the sake of everybody.” Dimon told analysts at Keefe, Bruyette & Woods that the firm has noted productivity slipping from employees working at home, the analysts said in a Sept. 13 note to clients. That, along with worries that remote work is no substitute for in-person interaction, is part of why the biggest U.S. bank is urging more workers to return to offices over the coming weeks.
Asia-Pacific’s Commercial Properties Battered as Investors Flee
Brief: Global investors have disproportionately reduced spending on commercial real estate in Asia Pacific compared with other regions amid the pandemic and the outlook remains challenging, according to a report. Total volume of commercial property acquisitions, including office, retail and hotels, was about 65% of the levels recorded in the last two years, the Switzerland-based Bank for International Settlements said in its quarterly review. By contrast, volumes in the Americas fell just 25% in the first half of the year, while those in Africa, Europe and the Middle East were little changed due to some large deals. “Cross-border investors may be particularly flighty when they face a large global shock such as the Covid-19 pandemic,” the BIS said. “It is then that their impact as marginal investors makes itself felt.” A surge in cases following the virus outbreak forced countries like China and Singapore to impose stringent border controls and lockdowns in the early days of the pandemic, making it harder for investors to seal real estate deals. Even as they’ve reopened their economies, those countries are still cautious in easing travel restrictions amid a resurgence in global virus cases that threatens to derail containment efforts.
Activist Hedge Funds Outshine the Competition, as Larger Managers Trail the Rest of the Industry
Brief: Activist-focused managers comfortably outperformed other strategy types last month, as the hedge fund industry continues to recover from the Covid-19 turmoil with solid August gains and positive year-to-date returns, new eVestment data shows. Activism-focused hedge funds rose 7.88 per cent in August. Known - and sometimes feared - for their often-combative approaches to investing, which include a range of tactics and methods to effect board level change and improve shareholder value, such funds have now made 3.25 per cent on average this year, eVestment said. That number is still down sharply from their 17.46 per cent gain last year, which itself represented a stellar comeback following a torrid 2018, when activists lost more than 10 per cent for the year. Overall, new eVestment metrics show that most hedge fund types and strategies are now in positive performance territory this year. Hedge funds added some 2.5 per cent on average in August, bringing their year-to-date returns to 2.21 per cent. That suggests the industry is broadly regaining its footing following a challenging few months amid the coronavirus crisis.
Citigroup to Resume Cutting Jobs, Ending Pause During Pandemic
Brief: Citigroup Inc. will resume job cuts starting this week, joining rivals such as Wells Fargo & Co. in ending an earlier pledge to pause staff reductions during the coronavirus pandemic. The cuts will affect less than 1% of the bank’s global workforce, the bank said in a statement. With recent hiring, overall headcount probably won’t show any drops, the bank said. “The decision to eliminate even a single colleague role is very difficult, especially during these challenging times,” Citigroup said in the statement. “We will do our best to support each person, including offering the ability to apply for open roles in other parts of the firm and providing severance packages.” The bank said it has hired more than 26,000 people this year, and over one-third of those jobs were in the U.S. The lender had roughly 204,000 employees at the end of the second quarter. Banks have resumed job cuts in recent weeks after pledging, en masse, to pause such actions earlier this year. Many firms are pushing to cut costs as the pandemic has dragged on, threatening lenders with higher credit costs and crimping revenue growth.
Largest Global Banks Lose USD635bn in Market Cap Amid Pandemic
Brief: New data from by Buy Shares indicates that 14 selected major global banks cumulatively lost USD635.33 billion in market capitalisation between December 2019 and August 2020, largely the main as a result of the coronavirus pandemic. Wells Fargo recorded the biggest slump with a percentage change in the market capitalisation at -56.26 per cent followed by Spain’s Banco Santander at -46.16 per cent. JP Morgan Chase’s change in market capitalisation was -30.16 per cent. During the period, Japan-based Mizuho Financial Group had the least change at -11.33 per cent. Intervention by central banks cushioned most facilities from a further slump. “The drop in valuations for the selected banks could have been much worse if there was no intervention from central banks. The immediate measures taken by regulators to ease restrictions on liquidity and capital, banks have proved beneficial," says Buy Shares. "Although the measures put in place by authorities helped banks, they still face some immediate pressures on their capital and liquidity position, as the length and severity of the outbreak remain uncertain.” An overview of the individual market capitalisation shows that JP Morgan still holds a superior position at USD437.2 billion in December 2019 and USD305.44 billion as of August 2020. In December last year, Wells Fargo market cap stood at USD227.5 billion and in August it stood at USD99.5 billion.
