China is planning to classify dogs as “pets” in order to avoid people eating them. They are also considering measures to discourage eating of other wild- life. In a way this new policy contradicts the conspiracy theory that the virus was developed in a lab in Virginia. Nevertheless, I do think that crisis will accelerate the polarization of the world between China and the US. In the UK I can sense a strong public backlash against China. This will be just one of the new dimensions of the new normal post COVID lockdown.
• The growth in new cases in the US and Europe continues to slowdown. The US reported 7.5% growth in new cases and the UK had 7.2%. This is a sharp decrease in the growth rate from the last week. The major success in the US is that Florida has avoided a major hit. Given the higher proportion of old aged people living there, it could have been much more vulnerable.
• The chasm between the performance of the economy and the market is the main point of discussion in the investment world. Strategists focusing on long term cite that equity markets typically follow the earnings growth – which in this case is expected to slide steeply. On the other hands, the momentum players advice jumping on
the ride. Stocks such as Sabre (global travel bookings system) and Expedia are up 30%-40% from their troughs. The US market is up 25% which is technically a bull market.
• According to Asad Umer, Pakistan will get capacity to do 900,000 tests by the 15th of April – which implies that by then we should get a more accurate picture of the infection. The government has also announced partial relaxation of the lockdown for industries involved in exports. I think the lockdowns will start opening by the 20th onwards around the world and the markets will continue to rally in anticipation of that.
• We hosted a call with Taimur Malik, Partner at Clyde & Co. Taimur highlighted a lot of issues involving litigation which have arisen and the sense I got was that it will be a legal mess. He thought that it will be difficult to companies to complete their quarterly audits on time which could also impact valuations and deal activity in the region. While there is a lot of interest in “force majoure”, Taimur emphasized that it can be effective in extreme cases. If all companies try to dishonor contracts, then the whole economic system can jam – leading to even bigger issues.
We pray for the good health of you and your families.
