How Strategists and Investors See Coronavirus Playing Out

(Bloomberg) -- A raft of new coronavirus cases in numerous countries outside China over the weekend has redoubled concern about the ability of the illness to spread, and potential economic impact.South Korea’s Kospi dropped as much as 3.8% after the country’s count of cases rose quickly to 763, and the government raised its infectious-disease alert to the highest level. Italy’s government imposed a lockdown on an area of 50,000 people near Milan and took other measures as infections exceeded 130. Iran reported an eighth death with 43 cases.That’s all on top of the impact on hardest-hit China, where millions of firms face potential collapse if banks don’t act, though China’s top leaders said in a statement after a meeting on Friday that they will exercise more flexibility in monetary and fiscal policy.Read: China Will Let Non-Local Residents Leave Wuhan: Virus UpdateHere’s what strategists and investors are saying about the developments.Normal by July?“More near term panic will weigh on risk, but panic is necessary to increase containment odds. Credit markets appear to recognize that,” said Dennis DeBusschere of Evercore ISI. “EISI’s Survey team asked investors about the impact of the outbreak and the vast majority of respondents see both the risks as understated and expect U.S. Treasury yields were likely to decline by 25 basis points (to about 1.3%). 80% of investors expect supply chains to return to near-normal by July though.” (The survey was published on Feb. 17.)Hard to Pick Bottom“With cases of COVID-19 still rising, it is hard to tell when manufacturing will bottom, potentially setting the stage for prolonged weakness,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “This means that we’re going to see the juxtaposition of more safe-haven demand.” He added, “this is a safe-haven trade -- you’re getting rid of risk in your portfolio.”Moving to Neutral“The virus spreading to Italy and Iran is finally spooking some investors on what has mostly been a mostly Asian situation,” said Rick Bensignor, president of Bensignor Investment Strategies. “With the SPX having reversed lower right from its weekly risk level at 3,394 -- and a daily negative divergence now in place -- I lower our tactical levered long position down to pure neutral. We’re also exiting our long Nikkei trade with a small loss.”‘Intense’ Hunt for Yield“We have been advocating a more balanced position between bonds and equities in recent weeks since we have little clarity on how the outbreak would evolve. It seems like that the number of new cases in China is coming down, with the daily number of recovered patients higher than the new confirmed cases. This may encourage the Chinese authorities to permit more workers to return to work and limit disruption to production,” said Tai Hui, chief market strategist for Asia at JPMorgan Asset Management. “The decline in bond yields also meant investors’ search for yield will remain intense. This underpins our constructive view on EM fixed income and developed market corporate debt.”Risk Aversion“Risk aversion is likely to intensify over the near term given the sharp rise in cases in Korea, Italy and elsewhere,” said Mitul Kotecha, senior emerging markets strategist at TD Securities in Singapore. “Markets are becoming increasingly focused on the risk of more prolonged economic damage than had been previously expected. Supply chains are becoming increasingly exposed, while services and tourism are suffering across many countries.”China Weakness“Policymakers are trying to get the economy going again but we think weakness is likely to persist well into the fourth quarter,” said Win Thin, global head of currency strategy at Brown Brothers Harriman, of China. “Stimulus is in the pipeline but it won’t be enough to totally offset the growing impact of the virus.”Asymmetric Dollar Strength“U.S. dollar strength will likely be asymmetric,” said Citigroup Global Markets Asia-Pacific chief economist Johanna Chua. “Given the low cost of capital globally and comforting commitments from authorities to render further support, high yielding emerging-market FX (Indian rupee, Philippine peso) may not hurt as much and is likely to outperform the low yielding EM FX especially in Asia, where the Singapore dollar, Thai baht, Korean won etc. are also the most impacted on economic activity -- and hurt on their current accounts. In spite of being a high yield FX, the Indonesian rupiah may have some more unwind of stretched long positioning before settling down.”Need to See MoreWe still need “to see the numbers that can provide a little bit more direction as to where things are going,” Jingyi Pan, market strategist at IG Group, told Bloomberg TV in Singapore. “Some of these high-frequency indicators are perhaps indicating that economic activity hasn’t much resumed yet, so these are the things we have to see coming back online.”Headline Risk“We view this as headline risk. Our base case view is that coronavirus continues to represent demand delayed and not demand destroyed,” said Steve Chiavarone, a portfolio manager with Federated Investors.Gold Rally“U.S. real rates have plummeted during the virus scare, with 10y TIPS yields -- already quite low at just 6.5 basis points above zero on January 17 -- are today more than 15 basis points below zero,” and John Velis, FX and macro strategist at BNY Mellon. “Since gold tends to trade inversely to real rates, the rally in gold will probably persist as long as the latter stay under pressure.”(Adds comments from JPMorgan AM, Citigroup.)\--With assistance from Vildana Hajric, Adam Haigh, Lilian Karunungan and Ruth Carson.To contact the reporter on this story: Joanna Ossinger in Singapore at jossinger@bloomberg.netTo contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Margo Towie, Lianting TuFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Morgan Stanley is paying $2,500 per customer for E-Trade. You can earn a $3,500 sign-up bonus for signing with a new broker — with one major catch

If the latest Wall Street mega-deal doesn’t make you want to switch online brokerage accounts for a lucrative sign-up bonus, maybe it should. Wall Street giant Morgan Stanley announced an agreement Thursday to pay $13 billion to acquire the online brokerage E-Trade which has 5.2 million customer accounts. “The combination will significantly increase the scale and breadth of Morgan Stanley’s Wealth Management franchise, and positions Morgan Stanley to be an industry leader in Wealth Management across all channels and wealth segments,” Morgan Stanley said in a statement.

• 
  Here’s Why E*Trade (ETFC), Adesto (IOTS) and Brickell Biotech (BBI) Shares Skyrocketed Today

  TipRanks
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  Morgan Stanley to buy online brokerage E-Trade for $13bn

  The Guardian

Millions of Chinese Firms Face Collapse If Banks Don’t Act

(Bloomberg) -- Brigita, a director at one of China’s largest car dealers, is running out of options. Her firm’s 100 outlets have been closed for about a month because of the coronavirus, cash reserves are dwindling and banks are reluctant to extend deadlines on billions of yuan in debt coming due over the next few months. There are also other creditors to think about.“If we can’t pay back the bonds, it will be very, very bad,” said Brigita, whose company has 10,000 employees and sells mid- to high-end car brands such as BMWs. She asked that only her first name be used and that her firm not be identified because she isn’t authorized to speak to the press.With much of China’s economy still idled as authorities try to contain an epidemic that has infected more than 75,000 people, millions of companies across the country are in a race against the clock to stay afloat.A survey of small- and medium-sized Chinese companies conducted this month showed that a third of respondents only had enough cash to cover fixed expenses for a month, with another third running out within two months. Only 30% of such firms have managed to resume operations due to a complicated local government approval procedure as well as a lack of employees and financing, a government official said at a press conference on Monday.While China’s government has cut interest rates, ordered banks to boost lending and loosened criteria for companies to restart operations, many of the nation’s private businesses say they’ve been unable to access the funding they need to meet upcoming deadlines for debt and salary payments. Without more financial support or a sudden rebound in China’s economy, some may have to shut for good.“If China fails to contain the virus in the first quarter, I expect a vast number of small businesses would go under,” said Lv Changshun, an analyst at Beijing Zhonghe Yingtai Management Consultant Co.Despite accounting for 60% of the economy and 80% of jobs in China, private businesses have long struggled to tap funding to help them expand during booms and survive crises. About two-thirds of the country’s 80 million small businesses, including many mom-and-pop shops, lacked access to loans as of 2018, according to China’s National Institution for Finance & Development.President Xi Jinping over the weekend pledged a greater focus on reviving the economy, with a more proactive fiscal policy, accelerated construction projects and freer reserves for commercial lenders to unleash more funding.Support from China’s banking giants in response to the outbreak has so far been piecemeal, mostly earmarked for directly combating the virus. Industrial & Commercial Bank of China Ltd., the nation’s largest lender, has offered relief to about 5% of its small business clients.In an emailed response to questions from Bloomberg News, ICBC said it has allocated 5.4 billion yuan ($770 million) to help companies fight the virus. “We approve qualified small businesses’ loan applications as soon as they arrive,” the bank said.As a group, Chinese banks had offered about 794 billion yuan in loans related to the containment effort as of Feb. 20, according to the banking industry association, with foreign lenders such as Citigroup Inc. also lowering rates. To put that into perspective, China’s small businesses typically face interest payments on about 36.9 trillion yuan of loans every quarter.Stringent requirements and shortlists restrict who can access special loans earmarked by the central bank for virus-related businesses, while local governments and banks have imposed caps on the amounts, according to people familiar with the matter. A debt banker at one of China’s largest brokerages said his firm opened a fast lane to ease debt sales by businesses involved in the containment effort, with borrowers required to prove they will use at least 10% of the proceeds to fight the disease.That’s of little help to a car dealership. Brigita, whose firm owes money to dozens of banks, said she has so far only reached an agreement with a handful to extend payment deadlines by two months. For now, the company is still paying salaries.Many of China’s businesses were already grasping for lifelines before the virus hit, pummeled by a trade war and lending crackdown that sent economic growth to a three-decade low last year.At most risk are the labor-intensive catering and restaurant industries, travel agencies, airlines, hotels and shopping malls, according to Lianhe Rating.Yang, a property manager of a seven-story mall in Shanghai, says a tenant who runs a 150-room hotel that’s usually busy has called asking for a month’s rent waiver after business dried up. She expects the massage parlor that rents space in the mall is also struggling and is open to extending some help.A deputy financing director at a small developer in central Anhui province said his firm is even being denied loans under existing credit lines. A drop in sales has hurt the company’s credit profile and a dearth of new projects means there’s no collateral to put up. Without access to credit, the business can survive for about four months, or maybe longer if some payments can be delayed, he said.Banks are hardly any better off themselves. Many are under-capitalized and on the ropes after two years of record debt defaults. Rating firm S&P Global has estimated that a prolonged emergency could cause the banking system’s bad loan ratio to more than triple to about 6.3%, amounting to an increase of 5.6 trillion yuan.Wu Hai, owner of Mei KTV, a chain of 100 Karaoke bars across China, took to the nation’s premier outlet of discontent, social media platform WeChat, to voice his despair.KTV’s bars have been closed by the government because of the virus, choking off its cash flow. The special loans from the authorities will be of little help and no bank will provide a loan without enough collateral and cash flow, he said on his official WeChat account earlier this month.Wu couldn’t be reached for a direct comment, but on WeChat he gave himself two months before he has to shutter his business.(Adds comment from official in 4th paragraph, updates lending data in 7th.)\--With assistance from Jun Luo, Emma Dong and Yinan Zhao.To contact Bloomberg News staff for this story: Evelyn Yu in Shanghai at yyu263@bloomberg.net;Ken Wang in Beijing at ywang1690@bloomberg.net;Zheng Li in Shanghai at zli698@bloomberg.net;Xize Kang in Beijing at xkang7@bloomberg.netTo contact the editors responsible for this story: Candice Zachariahs at czachariahs2@bloomberg.net, Jonas Bergman, Michael PattersonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Here are Warren Buffett's top 15 stock holdings

These are not stock market wagers, Buffett says.

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  Warren Buffett says Berkshire is '100% prepared' for his death, details what will happen to his stock

  Yahoo Finance
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  Warren Buffett shares an unfortunate story that reflects Berkshire Hathaway's incredible scope

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Here's what smart investors do with their 401(k)s when the stock market is hitting highs

Rarely do investors consider defensive moves in their 401(k)s when stocks are  rallying, but that's exactly when you should start thinking about them.