Macro Blog: Happy weekend

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Dear Friends,

I hear its a nice and sunny day in Karachi. London is also preparing for its spring. I’ll be honest, last week was very tough. We have been self-quarantined in almost a full lock-down with our two daughters, Mashal (9) and Manahil (6). I hear its mostly similar outside. In December, I spent a couple of nights in the hospital due to influenza which I probably caught on the plane – so the memory is not that pleasant. But my primary concern is for the safety of my father, 71, who lives in Islamabad. He spends 6 months in the summer in London, but right now is stuck in Islamabad. Like many countries with weak leaders, Pakistan’s leadership response so far has been a bit schizophrenic. 

For example yesterday the Prime Minister said that panic is a bigger issue than the virus. Today they have stopped all international flights and yesterday they sealed the border with India – yet the road route from Afghanistan is open. Similarly, the Prime Minister announced that on Tuesday, his government will provide a massive incentive for the construction industry to deal with the virus. Yes, I know, it sounds so ludicrous, that I dont know whether the appropriate reaction is dismay, anger or laughter. I can think of some better sectors which might need fiscal support (medical/pharma/food?).

On Friday I was finally able to push my father to send the home staff on holidays and to stop the guys who were coming for the paint work. My biggest fear was the Friday prayers – mosques seemed filled. Clearly the message of social distancing has not gone down well there. Church gathering was the reason South Korea lost control of the virus.

South Asian social system doesn’t allow social distancing. Not a surprise then that it was the worst hit region by the Spanish flu in 1918 (17 m deaths). The Prime Minister said that he hopes hot weather will be the cure. Arggh – when I started writing, I was planning to keep it joyful and positive (its a weekend after all). But merely thinking of the policy responses in Pakistan makes me feel like smacking a book on my head. Reminds me of the grim five months when my mom was diagnosed with terminal liver cancer – seeing things gradually worsen everyday with the knowledge that it will only worsen the next. Need a break for some deep breath. 

At KASB Research team, we are publishing a daily update on COVID19 and have published some detailed notes on the markets. If you are not on that mailing list, and want to join, please email me ([email protected]). 

In Pakistan, I am not just hoping that the hot weather might save but I am also hoping that there might be some superior (more organized) institutions which might manage the policy response as a national security emergency. I suppose its already happening. Also I expect/hope/pray that China will support. There is news today that 200 Chinese doctors are coming to Pakistan. Jack Ma also announced support. There is an interesting article in Foreign Policy about how China could emerge as the global leader and reshape the global order (click here). President Trump seems to have similar response as our Prime Minister. What I find more interesting is that until two weeks ago, Michael Bloomberg spent $500m on TV ads, spreading the propaganda that he can be a good leader for his people. I am very curious to see how much will he now spend to show actual public leadership when it is required. 

Besides consuming the grim news and reading articles about how an eventual recovery of the markets could be from this crisis, I am listening to a couple of books on Audible. One is Factfulness by Hans Rosling (click here) and the other is the lecture series by Prof. Richard Baum on the Fall and Rise of China. The main takeaway from Baum’s narration of Chinese history is how important a leader can be in driving the outcome of societies and nations. I have also started following my friend and former colleague Sarah Grogan’s live Yoga Classes on Instagram (@digmefitness). Some of the other live training posts are also good. Some other books I have stocked up to read are The New World Order by Henry Kissinger (click here) and Invest for Good by Mark Mobius, Carlos Hardenberg and Greg Konieczny (click here) -I was kindly gifted a signed copy by Usman, the last time I visited their offices.

The markets might remain depressed for the next 12-18 months. Post that I think there will be a greater push towards rethinking of capitalism. ESG will become a primary requirement. The shift towards digital will accelerate and become the new normal. As the FT wrote, Sanders has won, even if Bernie might have lost. More of this for some later blog. 

I hope and pray that you and our families stay safe and healthy. 

I am, yours truly,
Ali Farid Khwaja

* This is not research material and there is no investment recommendation in this blog. These are my personal views and do not represent the views of KASB Research team. 

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