31 Mar FIRST BANK TO CITE VIRUS; EARLY SUPER DRAWDOWN WILL EXPOSE “FAIRWEATHER” INVESTMENT STRATEGIES
As Australia’s Prime Minister announced a $130 billion stimulus package, the COVID-19 emergency continues to dominate headlines globally – and is likely to continue to do so for some time to come. So, here are the insights we have collected over the past 24 hours to share with you.
- Data from market research firm Nielsen shows that in times of crisis, people are consuming more media. Television use in the US is up 18 per cent in the week ending 22 March, and internet usage is up by 28 per cent. Although the surge in demand may help some streaming companies in the short term, The Economist notes it is unclear whether the benefit will be long-term for companies like Netflix as even the most loyal of customers, “no matter how bored they are, will not put up with re-runs of old shows for ever”. Read The Economist article here. (Subscriber access)
- Blackrock’s Letter to Shareholders this week focuses on the impact of coronavirus. Blackrock Chairman Larry Fink said: “In my 44 years in finance, I have never experienced anything like this”. The good news? Fink also says that “as dramatic as this has been, I do believe that the economy will recover steadily, in part because this situation lacks some of the obstacles to recovery of a typical financial crisis.” He said that the outbreak “has sparked a re-evaluation of many assumptions about the global economy, such as our infatuation with just-in-time supply chain or our reliance on international air travel”.
- The New York Times is reporting on extraordinary measures taken by governments in times of crisis, such as increasing surveillance and waving through emergency legislation in hours. However, the paper asks whether this could result in autocrats using “the public health crisis as cover to seize new powers that have little to do with the outbreak, with few safeguards to ensure that their new authority will not be abused”. Read the New York Times article here.
- The New Yorker’s cartoon today reflects the rapid pace of change – see below.
Australian company news
- First bank to cite virus in guidance withdrawal
- According to The AFR, The Bank of Queensland has become the first bank to withdraw its guidance for FY20 due to the coronavirus. The bank also indicated that it would no longer seek regulatory approval for a profit-linked exemption on dividends. Read the AFR article here. (Subscriber access)
- Early superannuation drawdown will expose “fairweather” investment strategies
- The ministers responsible for superannuation, Jane Hume, told the virtual AFR Banking and Wealth Summit yesterday that superannuation funds with growth-only strategies would be exposed as would boards who had failed to plan for pandemic-like events . Hume used a famous Buffet quote to demonstrate her point: “It’s only when the tide goes out that that you learn who has been swimming naked.” Read the AFR article here. (Subscriber access)
- Wesfarmers’ sale of Coles stake confusing investors
- The decision by Wesfarmers to sell another five per cent of Coles overnight has investors in two camps: does the sale give Wesfarmers a more robust balance sheet for acquisitions or does it signal a “battening down of the hatches for more shutdowns”. Read The Australian article here. (Subscriber access)
- FIRB’s ruling on foreign investment may make funding more difficult
- The Australian Investment Council warns that stricter FIRB rules, which now require pre-approval of all foreign investments, could mean that Australian companies find it more difficult to get access to funds that may have come from private equity investors as most private equity funds in Australian involved investment from overseas investors. Read The Australian article here. (Subscriber access)
Our daily briefing is not meant to be a summary of media coverage but rather, insights that may be helpful in understanding how organisations are communicating with stakeholders in a time of crisis – and what comes next. Sign up via email.