Earlier this week (Monday to be precise) we saw an interesting compendium of data points on the virus from Charlie Robertson, Global Chief Economist at Renaissance Capital. This outfit has an excellent handle on emerging and frontier markets data, so worth listening to….
Here are some of the most interesting headlines
- The case fatality rate continues to decline in Hubei – it is 7.7% this morning (Monday morning) . If we take Hubei AND Iran out of the data, the case fatality rate is now 1.7% for every other Chinese province and every other country in the world put together. This has edged up in recent days from a low of 1.4% because there have been 34 deaths in Italy and 83 recoveries and 26 deaths in South Korea and 30 recoveries. It takes much longer (at least a week or so) to prove you have recovered rather than died. So in the first weeks of a country/province seeing a surge in cases, the case fatality rate seems much higher (in Hubei it was over 60% a month ago).
- If we look only at China’s data ex Hubei as of yesterday – the case fatality rate is 1.0%and this seems more plausible for everywhere which has a serious government/health response, and where the population is not old. And that figure may well fall further.
- For those who are concerned about the virus, remember that based on the first 1,000 fatalities (almost all in the disaster zone that was Hubei), 99% under the age of 60 recoveredand all young children under the age of 10. See this tweet or the table below. This remains concerning for those of us with parents in 70+ age bracket, but 85% of over 80 year olds survived in China too.
- Italy and Japan ought to suffer more than South Korea given the higher average age of their populations, while a Nigeria might suffer less because 31% of its population is under 10.
- We expect tourism receipts to take a hit (see attached email – PS, it’s Vikram Lopez’s cousin who has a pizzeria in Italy, not mine). Would not be a surprise if the EGP weakened from 15.6/$ to 16.0/$. Greece (equities fell 17% last week), Georgia and Turkey too may suffer in the short-term. Just read Cathay Pacific has parked half its fleetand cut March flights by 75%.
- For oil exporters – we think Russia GDP still accelerates to 2.2% with oil at $50/bbl – see Sofya’s email. Nigeria’s Nafex rate looks more vulnerable to weakness after FX reserves dropped $1.8bn in February to $36.4bn – and S&P on Friday followed Moody’s and put the country on a negative outlook (see our Africa Eurobonds piece in December for more on why we favour Ghana over Nigeria). Our head of oil still assumes oil prices around $60 this year.
- We think countries like Kenya and Pakistan are relative beneficiaries, due to declining oil prices.
- Renaissance Capital Conclusion: “…[it] won’t be surprising if we see other buying opportunities on the assumption that virus numbers jump in Germany and France this week, and the US and UK soon. “
Numis on the viral impact on listed funds
It’s also worth noting numbers out this week from Numis on the impact of the virus on investment trusts, summed up in the excellent table below.
According to Numis, the biggest impact has been on growth funds such as
“…..Manchester & London, Allianz Technology and Baillie Gifford European Growth. There are a number of Smaller Company funds represented across geographies including North America (JPM US SmCos), Japan (Atlantis Japan Growth), Global (Smithson, Edinburgh Worldwide), as well as many UK Smaller Companies ICs, partly due to widening discounts. In contrast there are no Asia Pacific ICs, as developed markets were playing catch-up from previous Asia and Emerging Markets declines. As a consequence of the large moves in share prices of underlying holdings and potential portfolio realignment by some managers it has become more difficult to accurately estimate NAVs and therefore it is understandable to see widening of discounts”.
My observation? Buy Schroders UK Mid Cap fund for the biggest bounce back in the next few months.
Equity IC Laggards – Share price total return w/c 24 February
|Stock||Sector||Sub-sector||Current Mkt Cap||% change in share price||% Premium/(Discount)|
|Manchester & London||Global||Equity||168||(18.6)||(11.0)|
|Baring Emerging Europe||Emerging Markets||EmgEurope Regional||90||(18.6)||(17.3)|
|JPMorgan US Smaller Cos||North America||Smaller Company||177||(18.4)||(4.9)|
|Acorn Income||UK||High Income SmCos||53||(18.4)||(22.0)|
|Schroder UK Mid Cap||UK||Mid Cap||190||(18.0)||(10.1)|
|BlackRock Throgmorton Trust||UK||Smaller Company||472||(17.6)||(2.2)|
|Aberforth Split Level Income||UK||High Income SmCos||137||(17.2)||(16.1)|
|Allianz Technology||Sector Specialist||Technology||571||(16.8)||(8.3)|
|Standard Life UK Smaller||UK||Smaller Company||527||(16.8)||(6.8)|
|Atlantis Japan Growth||Japan||Smaller Company||77||(16.7)||(14.7)|
|Smithson IT||Global||Smaller Company||1,348||(16.7)||(4.8)|
|Invesco Perpetual UK SmCos||UK||Smaller Company||176||(16.7)||(7.2)|
|JPMorgan Global Growth & Income||Global||Equity Income||419||(16.6)||(3.2)|
|JPMorgan Smaller Companies||UK||Smaller Company||208||(16.6)||(8.5)|
|BlackRock Smaller Cos||UK||Smaller Company||725||(16.4)||(4.7)|
|Henderson Smaller Companies||UK||Smaller Company||665||(16.2)||(7.5)|
|Ecofin Global Utilities & Infrastructure||Sector Specialist||Utilities||144||(16.2)||(11.5)|
|Baillie Gifford European Growth||Europe||General||288||(16.0)||(9.2)|
|JPMorgan Russian||Emerging Markets||EmgEurope Russia||290||(15.8)||(13.3)|
|JPMorgan Elect – Managed Income||UK||Equity Income||77||(15.5)||(7.7)|
|BlackRock Energy & Resources Income||Sector Specialist||Metals & Mining||64||(15.4)||(16.1)|
|Edinburgh Worldwide||Global||Smaller Company||569||(15.2)||(2.1)|
|BlackRock World Mining||Sector Specialist||Metals & Mining||555||(15.1)||(15.1)|
|JPMorgan Mid Cap||UK||Mid Cap||286||(15.1)||(2.2)|
|Henderson Opportunities||UK||All Companies||72||(14.8)||(18.4)|
|International Biotechnology||Sector Specialist||Life Sciences & Biotech||208||(14.6)||(14.4)|
|Schroder Income Growth||UK||Equity Income||182||(14.5)||(2.3)|
|Independent IT||UK||All Companies||274||(14.5)||(10.4)|
|FTSE All Share||(10.8)|
Discounts as at 28 February. Funds >£50m mkt cap. Source: Bloomberg & Morningstar