[Weekly Newsletter] Enormous deleveraging is taking place, correlations go to one in a crisis (03/15-03/21)

21 Mar, 2020 04:16
source: Singularity Financial

Singularity Financial Hong Kong March 21, 2020 – All About ESG Investing In Asia

“No one knows what we will face in the weeks ahead, but everyone knows enough to understand that COVID-19 will test our capacities to be kind and generous, and to see beyond ourselves and our own interests. Our task now is to bring the best of who we are and what we do to a world that is more complex and more confused than any of us would like it to be. May we all proceed with wisdom and grace.”  – from Lawrence S. Bacow, President of Harvard University

Markets & Coronavirus

  1. Enormous deleveraging is taking place! In a crisis, correlations go to one. VIX, surged to as high as 82.69 on Monday this week. That’s short of the index high of nearly 90, set in October 2008.  Stocks down, bonds down, credit down, gold down, oil down, copper down, crypto down, global systemically important banks down, and liquidity down…Hedge funds have struggled with margin calls during the rout which has led to a shedding of liquid assets. But US Intelligence Chair Richard Burr walked away safe and sound with US$1.7 million of his holdings unloaded by mid February. 
  2. “I am levered 200 to 1, I need $2 trillion tomorrow Or…” Ray Dalio told CNBC reporter, “We did not know how to navigate the virus…” He estimated the US corporate losses will amount to $4 trillion due to the coronavirus pandemic, “a lot of people are going to be broke,” and President Trump needs to double his stimulus plan.
  3. “The shutdown is inevitable as it is already happening, but not in a controlled fashion which is extending the economic pain and amplifying the spread of the virus,” Bill Ackman wrote in his Twitter thread to President Trump.Please send everyone home now. With your leadership, we can end this now.” As of Friday March 20, both California and Illinois have moved forward with an effective lockdown, at the mean time, New York told nonessential workers to stay home.

ESG Investing

  1. Top 10 topics for directors in 2020, including board diversity, corporate reputation, pay equity, shareholder activism and many more.
  2. Businesses need not face an either-or choice between purpose and profit.  The next wave of shareholder activism is socially responsible investing.
  3. Fund giant BlackRock‘s Wednesday release laid out its corporate engagement priorities for the year. The next shareholder proxy season looms in early April, which will test BlackRock’s commitment to stewardship. 

Shareholder Activism 

  1. South Korea introduced a law in February to support a new form of activism by “general” equity investors, enabling minority shareholders to have a say in corporate decisions.

Trending Topics

  1. The SFC and The Stock Exchange of Hong Kong Limited are releasing further guidance for listed issuers with 31 December financial year end on the publication of their preliminary results and annual reports.
  2. Federal Reserve Board announces establishment of a Commercial Paper Funding Facility (CPFF) on Tuesday to support the flow of credit to households and businesses.
  3. Ray Dalio, the founder of world’s largest hedge fund Bridgewater Associates, sent a daily observations to its investors denying the rumor of fund’s margin calls.
  4. This bear market in stocks is only two steps away from turning into a monster

Local News

  1. Hong Kong recorded what is by far its biggest daily jump in coronavirus cases on Friday as new wave of infections crashes into Asia
  2. Hong Kong issued a “red” travel alert urging people to adjust their plans and avoid non-essential travel to Ireland, Britain and the United States
  3. Standard Chartered, in partnership with PCCW, HKT and Trip.com, is set to launch a new virtual banking service and Asia’s first all-in-one numberless bank card, Mox.
  4. The SaaS company FiO‘s latest disruptive application combats the proliferation of “fake news” on the web
  5. Coronavirus has put pressure on Chinese real estate developers
  6. Tesco retreats further from Asia by disposing assets and returning fat cash to shareholders