Welcome to the second edition of our financial services COVID-19 crisis digest, where we aim to provide the latest insights across the many capital markets and financial services industries we support.
We have also shared our views on how to present your best self on video conferences, digital marketing best practices right now, and how to turn lemons into lemonade for your corporate culture.
View from the Top
Will the recovery be V, L or U-shaped? Philipp Carlsson-Szlezak, chief economist with BCG published a piece in the Harvard Business Review analyzing past economic shocks with a view towards what we might expect.
Positive news has been thin on the ground in Europe and New York, but there are green shoots in Asia. All eyes now are on China as the country is the first to emerge in stages from its lockdown. As daily life slowly returns to normal, expectations are that economic recovery will begin here too – though as Bloomberg reported, the process is fragile and still to an extent dependent on progress elsewhere in the world. The Financial Times noted a further sign of China’s changing role in global finance: the emergence of its bond market as a safe haven. February saw $10.7 billion put into Chinese bonds by offshore investors, and it’s thought this trend has continued throughout March.
Veteran columnist Andrew Rawnsley in The Observer points out that we are still politically (and indeed medically) in the “phony war” phase of the crisis, with people desperate to believe and support authority. Meanwhile remote EU-UK trade negotiations continue, with some arguing for an extension of the transition period.
Employment pledges are spreading through the banking sector in the US. Desperate to be seen as helpful in this current crisis, Bank of America and Morgan Stanley promised no job cuts this year because of coronavirus. American companies are scrambling to issue the first small business loans stemming from the CARES stimulus passage approved late last week. Treasury Secretary Munchin promised aid quickly – a formidable implementation challenge for banks. Here’s a guide from Forbes for small businesses.
Meanwhile digital banks in the United Kingdom were unclear if they were able to offer government-backed loans to struggling small businesses. This is Money looks into the fine print behind bank grace periods and fee waivers.
Corporates have responded by leaning on banks and investors over the past week, tapping revolver funds for emergency credit while also going to the bond market. Investment grade corporate bond issuances “surged to $244bn so far in March, the highest monthly total since a record $252bn was sold in September.”
An analysis in Finextra this week suggested peer-to-peer payments, consumer lending and health insurance to be obvious beneficiaries from the current disruption. Meanwhile Rosenblatt Securities suggested we could be in a wave of acquisitions in the sector: “Online alternative lending, digital wealth management, and consumer banking are sectors most likely to see M&A deals, believes Rosenblatt, as incumbents use strong balance sheets and wider distribution to snap up bargains.”
The virus outbreak has accelerated dealmaking in fintech, especially in Singapore and Southeast Asia, where applicants for the city states new digital banking licenses and traditional banks alike are bolstering capabilities to compete (and survive) in a new market reality, according to SenaHill Partners.
Debate is raging about the ethical implications of legendary hedge fund investor Bill Ackman – who predicted doom on CNBC three weeks ago while also betting millions on shorting the market. He’s made more than $3 billion already, and his defense over his positions are detailed, by him, on his Twitter thread.
Bloomberg’s Emily Chasan looks at the learnings for future shocks resulting from climate change, while The Wall Street Journal reports on how ESG factors might be expanded to include employee benefits and the ability to adapt during a crisis.
The FT’s Robin Wigglesworth takes a swipe at hedge funds, saying that this period may be their last chance to prove their worth. According to eVestment, they did in February. March figures will be telling.
Private equity is eyeing “any technology that helps companies do more with little reliance on manpower,” to deploy their dry powder. These include “productivity platforms,” such as remote working tools, digital education apps and digital healthcare businesses.