The US jobless claims increased to 6.6m. Analyst’s consensus estimate was 3.7m. This shows how futile financial modelling is. I say this because, obviously the most frequent question I get asked is if the valuations are cheap for investing. The reality is that any opinion is pure guesswork at this time (more so than in other times).
• Oil prices jumped up 10% today on the back of hopes that the US will force a truce between Russia and Saudi Arabia. I am not sure if supply cuts would be enough to deal with the demand shock. I think we will remain in a low demand environment for some while.
• The markets are likely to remain schizophrenic with high volatility. My base case scenario is that, like in the case with Spanish flu, the virus will remain an issue for atleast 12-18 months. However, the infection will past it peak in Europe and the US by end of May and lockdowns will ease post that.
• Unless the theory of TB/Malaria resistance to COVID is correct, South Asian cases are expected to peak by June, after it ebbs in the US and Europe. In a way, the curve of infection is following the pattern of travelers. Countries which are more highly integrated with global flow of people are getting hit first.
• Globally infections are now reaching 1m. The infection number is almost now becoming an irrelevant statistic (except for being an indicator for the death rates). There
have been 47,272 deaths by now and the UK, Spain, Italy and the US are getting most badly hit.
• For Pakistan my biggest fear is the hit to the retail sector. Typically, the months of Shaban and Ramadan are high volume seasons especially for the fashion retail value chain in textile. The hit from these two months might create permanent cash flow issues for some companies. The same thing happened in China as the New Year season was wiped out. Many of these retailers might not be in the formal banking net and consequently the policy measures announced by the government might not reach them.
• We have arranged a Webinar with Bob Zhang, Managing Partner of Pine Street Capital in Beijing and Yinyan Huang, Head of Corporate Development of EastSpring Investments tomorrow at 4pm Pakistan time. I think the experience of China could give good lessons on the social and economic impacts from the lockdown.
We pray for the good health of you and your families
