KITA 경제정보

[KOCHAM] COVID-19 경제 정보 Updated (JP 모건, Key reports from economics, strategy, FICC and equity research)

kita master
2020-04-22 21:24
안녕하십니까? KOCHAM 사무국입니다.

아래 J.P. 모건의 COVID 관련 경제 정보 보내드립니다.
또한 아래에는  Highlights from 2020 Virtual IMF/World Bank Spring Meetings도 포함되어 있습니다


  This report is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan.  

We have received many requests to highlight key reports published by the Global Research team on the implications of COVID-19 for the global economic and markets outlook. Each week, we will highlight the key reports published; this edition features reports published from April 13–19 and come recommended by the team heads across J.P. Morgan Global Research.


Despite concerns about de-globalization and the decline in international cooperation and coordination, the message from our virtual investor seminar during the  spring IMF/World Bank meetings was a clear commitment to avoiding a systemic shock to global financial markets at the same time that a humanitarian crisis is playing out. With the consensus that major countries in Asia, the US and Europe are at the peak or close to the peak for the infection rate, markets are now focused on the timeline for successfully returning to work. Staggered re-openings of economies until a vaccine is widely available imply more of a U- rather than a V-shaped recovery for the global economy. Asset classes supported by Fed facilities continue to benefit most, with the underlying message that if companies really need the money but are struggling to get it through the various programs, the Treasury and Fed will find a way to modify them as necessary to get credit flowing to where it’s needed. The past week has seen the first simultaneous inflow into equity and bond mutual funds since the beginning of February. The normalization of funding markets has continued with Yankee and High Yield dollar bond markets showing signs of improvement. On the macro side, this week’s March activity data confirm a historic collapse in output at the end of Q1, but China’s recovery in March, led by manufacturing, is V-shaped, and we remain confident that this will continue in 2Q and 3Q. We expect around 25 million US job losses in the April report, enough to bring the unemployment rate to 20%. The OPEC+ agreement has failed to impress but put a floor on oil prices to not dip into the single-digits by addressing storage capacity issues, but it does not address excess supply or the dramatic drop in global demand.


Joyce Chang, Chair of Global Research Noelle V. Grainger, Head of Global Equity Research
Bruce Kasman, Chief Economist Marko Kolanovic, Global Head of Quantitative and Derivatives Strategy
Matthew Jozoff, Head of Credit, Index, Securitized Products, Public Finance and Rates Research Luis Oganes, Head of Currencies, Commodities and Emerging Markets Research

Top Charts of the Week


Global corporate profits set to crater 72% through 2Q20, and lost profits will cumulate to roughly three-fourths of one-year’s earnings by the end of 2021
Global nominal GDP and corporate profit growth

%oya; both scales (Forecast 1Q20-4Q21)

Global corporate profits, level and cumulative loses
Index (LHS); % of pandemic profit baseline (RHS)

Source: J.P. Morgan; GDP-weighted MSCI (Bloomberg) by country, DM recession bars (Global profits to plunge, Joseph Lupton, 14 April 2020)
The COVID-19 impact on many emerging countries may be 4-6 times lower compared with the most negatively affected areas of the developed world such as northern Italy due to younger populations

Median population age (x-axis) vs. COVID-19 mortality normalized to 1 for Italy (y-axis)

Source: J.P. Morgan QDS (Market and Volatility Commentary: Pandemic in Emerging Markets – examining the positive impact of age, prevalence of BCG immunization, and climate, Marko Kolanovic, 16 April 2020)

Sharp revisions to 2020 EPS globally but guidance is not severe enough; however, sustainable dividend companies have traded at a structural 4.2x premium to the market and could further re-rate
Sharp Revisions to 2020 EPS Globally


Source: J.P. Morgan US Equity Strategy & Global Quantitative Research, Factset, Bloomberg, IBES (US Equity Strategy: Earnings, Shareholder Return, Sustainable Dividends, Dubravko Lakos-Bujas, 16 April 2020)
Guidance not Severe Enough — 1Q Reporting Risk?
Net (Up Less Down)


Source: J.P. Morgan US Equity Strategy & Global Quantitative Research (US Equity Strategy: Earnings, Shareholder Return, Sustainable Dividends, Dubravko Lakos-Bujas, 16 April 2020)
The Fed could end up owning nearly 3.6% of the US HG+ Fallen Angels market

Source: J.P. Morgan US High Grade Strategy & Credit Derivatives Research (A Shopping List for the Fed: An estimate of corporate bonds eligible for the Fed's secondary buying program and where they may focus, Eric Beinstein, 14 April 2020)

  In Asia Banks, we introduce a new framework based on six measures to evaluate the evolving macro, and efficacy of support measures by looking at the impact of current actions, events on 2022 earnings, and growth outlooks to pick stocks in the near term
Source: J.P. Morgan (Asia Banks: The new normal, a framework (part 1), Harsh Modi & Katherine Lei, 14 April 2020)

Cross-asset conference calls and views

  Highlights from 2020 Virtual IMF/World Bank Spring Meetings, Joyce Chang
More than 1,700 investors from around the globe virtually attended our Investor Seminar during the International Monetary Fund and World Bank Spring Meetings on April 15-17, which featured meetings with policy makers, official creditors and independent analysts. Despite the concerns about de-globalization and the decline in international cooperation and coordination, the Federal Reserve has rapidly taken on the role of the central banker to the world to avert a systemic shock to the global financial markets at the same time that a humanitarian crisis is playing out. Don’t fight the Fed was the mantra of the 2008 Global Financial Crisis and remains the mantra for the COVID-19 pandemic with respect to asset selection. With the consensus that major countries in Asia, the US and Europe are at the peak or close to the peak for the infection rate, markets are now focused on the timeline for successfully returning to work. China’s recovery began in March while activity collapsed elsewhere, and is V-shaped. Outside of China and North Asia, as the virus and financial stress are contained, the case for a 2H bounce builds but the recovery will likely be a wave, rather than V-shaped.

The J.P. Morgan View: Secular winners and losers from COVID-19, John Normand
The fastest retracement from the fastest bear market has extended for a fourth week, except in EM FX and Commodities that remain relatively orphaned through lack of broad and sizable policy support now common in the Developed Markets.
Beyond this policy-induced rebound, within which we’ve favored US/Euro Corporates plus EMU Sovereigns, a multi-year investment principle should be to overweight secular winners in a post-COVID world and to distinguish between value opportunities and value traps. A shift from the sharing economy to an on-line, self-insured, surveilled and protectionist one might sound somewhat Orwellian, but it nonetheless implies further leadership by Tech plus (parts of Comms & Discretionary) & uncharacteristic leadership by a defensive (Healthcare). These sectors are so dominant in US indices that secular trends post-COVID-19 imply US outperformance vs non-US stocks. But a higher relative return on US Equities doesn’t have to imply a strong USD.


Flows & Liquidity: There is room for further short covering, Nikolaos Panigirtzoglou

The past week has seen the first simultaneous inflow into equity and bond mutual funds since the beginning of February. And it was the first inflow into bond funds after six consecutive weeks of outflows. While we acknowledge that short covering has advanced in risky markets, in particular among trend-following investors, we still find that this trend is far from being exhausted and thus can continue to propel risky markets from here, in particular equity and HY credit. Cumulative, government money funds had seen almost $1tr of inflows over the past seven weeks, and if we include US bank deposits this amount rises to $2tr. In our opinion, this $2tr of dollar cash is likely to gradually re-enter bond and equity markets as retail investors continue to normalize their behavior and further cover their equity underweights. The normalization of funding markets has continued with Yankee and HY dollar bond markets showing signs of improvement.


When will the COVID-19 pandemic peak?

  Healthcare Facilities & Managed Care: COVID-19 Daily Report, Gary P Taylor On April 17, the US reported a daily total case growth that remained in the single digits for the 12th straight day. President Trump issued a set of nonbinding guidelines to governors about reopening their states while New York extended their shutdown to May 15th. China revised Wuhan’s death toll up ~50% overnight, which continues to add skepticism about the accuracy of their data. For US managed care, COVID-19 costs are immaterial thus far, but if we assume Italy is ~86% “through their curve” and the US experiences 50-100% of the per capita extrapolation; a 2020 Medical Loss Ratio (MLR) range of 27-174bps emerges (with ~69-139k deaths). On a near-term basis, the far larger impact of deferred procedures is pushing MLR and hospital patient volumes down materially.

COVID-19 Europe: German recovery continues to advance, but France gets worse again after another jump in infections, Richard Vosser
On April 16 while Germany continued to recover, with net active cases falling by 3% day over day (d/d), at the other end of the spectrum, the data suggests there is no end in sight for France with active case growth of 15% d/d.
A big jump once again in daily new infections to 17k suggests France is unlikely to peak until May, with the lockdown in France now likely to stretch into June. For the UK, the daily new infection data is starting to suggest a plateau in the level of daily new infections, but not yet in active cases (particularly as the UK is yet to report on recovered patients). For Spain, the data shows active cases at a plateau, and for Italy, active cases continue to grow at 1% as in both countries the recovery of patients continues to be underreported, in our view. Overall, only Germany seems to be heading nearer to the end of their lockdown, with daily new infections remaining at high levels in the rest of the EU5 countries.

Market and Volatility Commentary: Pandemic in Emerging Markets – examining the positive impact of age, prevalence of BCG immunization, and climate, Marko Kolanovic, PhD

In this report we analyze the positive impact of age demographics and other possible mitigating factors in emerging markets. Our findings indicate that a much better outcome is likely in many emerging market countries. This is primarily due to their significantly younger populations, and the exponential decline of virus mortality for younger individuals. Our analysis also shows a statistically significant relationship between BCG (Bacillus Calmette-Guérin) vaccinations – which are prevalent in emerging economies – and reduction of both COVID-19 infection rates and mortalities.


Global economics and macro implications of COVID-19

  Global profits to plunge, Joseph Lupton Corporate profits to bear brunt of the COVID-19 recession. Corporate income is levered to GDP and corporate profits are likely to take on a large portion of the overall income loss from the COVID-19 recession. We project global profits to experience a roughly 70% peak-to-trough decline in 2020. Even with a projected strong subsequent rebound, global profits are expected to stand 20% below their forecasted pre-pandemic level at the end of next year. With corporate debt set to balloon and a significant rise in bankruptcies increasingly likely, the overall deterioration of corporate sector balance sheets will likely be an ongoing legacy of the COVID-19 shock.

US: A labor market on lockdown, Daniel Silver & Jesse Edgerton
We expect around 25 million job losses in the April report, enough to bring the unemployment rate to 20%.
With more than 22 million initial jobless claims filed over the last four weeks, we know that job losses in the April employment report released on May 8 will be massive. If restrictions on entertainment, travel, and restaurants stay in place, unemployment could remain above 10%.

Following the herd in COVID-19 exit strategies, David Mackie
The presumed aim of public policy in the face of COVID-19 should be to allow the development of herd immunity while minimizing the pressure on healthcare systems, deaths, the economy, and social welfare as the development of a vaccine proceeds. Severe economic and social shutdowns are effective in stopping the COVID-19 epidemic. But the economic and social pain is significant, and herd immunity is not being built. A potentially better approach would be to consciously focus on age- and morbidity-related restrictions. Hospitalization and deaths are strongly related to age and co-morbidities. If mixing between the elderly and the less vulnerable younger populations can be sufficiently reduced, the economy and society can get back to work quickly, herd immunity can build, and the health care system as well as the old and vulnerable can be protected.


Market implications of COVID-19

  Market and Volatility Commentary: COVID-19 herd immunity and importance of regional datasets – Gangelt, Faroe, Iceland and UAE; Fed’s historic pivot, Marko Kolanovic, PhD
The critical question to direct the prevention of further spread and reopening of the economy is: what percentage of the region’s population has developed immunity? This is currently unknown due to the large number of asymptomatic and recovered cases that were never recorded. Can one get an answer short of testing the entire population for COVID-19 and antibodies? We think yes, and we outline the steps by combining geographical and demographic data on COVID-19 cases and estimating the true mortality rate. When it comes to market developments, we believe that the Fed’s action last Thursday represents a pivotal moment in this crisis, and the significance of this development is underestimated by markets. This reinforces our view of a full asset price recovery, and equity markets reaching all-time highs next year, likely by H1. Investor positioning remains light. Hedge funds are positioned defensively, and systematic investors’ exposure is near the bottom of its historical range. CTAs would be covering shorts / buying long if the S&P 500 reaches ~2900. Volatility-targeting funds will start adding equities as volatility declines. Initially this would be at a very slow pace. Given the Fed’s corporate bond backstop, we believe the VIX should follow credit spreads lower.

US Equity Strategy: Earnings, Shareholder Return, Sustainable Dividends, Dubravko Lakos-Bujas

While the earnings outlook will remain challenged, especially in 1H20, investors are increasingly discounting the COVID-19 hit to fundamentals this year and turning their gaze to a 2021 recovery. We maintain a positive view on US equities given faster than expected progress in governments containing the virus spread, an unprecedented monetary and fiscal response, and very favorable investor positioning (HFs equity beta at ~10th %tile, CTAs could go long equities at ~2900, and Vol-targeting funds should increase equity exposure). Consensus is still far from recalibrating 2020 S&P 500 EPS with estimates ranging from a low of ~$50 to a high of $150. Investors are increasingly anchoring their view on 2021 / 2022 EPS potential and treating 2020 as a one-off event. Sectors most sensitive to COVID-19 are showing the highest EPS dispersion ever for Consumer Discretionary, Staples, Healthcare, as well as Energy. Earnings uncertainty within Tech and Communication Services as well as Utilities remains a lot lower. Even our analysis of GDP to EPS sensitivity is pointing to a wide range of possible outcomes. Using JPM’s updated US real GDP forecast of a -7% decline in 2020, our top-down model implies EPS contracting by 33% in 2020 to $110. If actual GDP comes in +/- 1% from this estimate, S&P 500 EPS could swing by $5.

As the dust begins to settle: Finding attractive levered returns, Banks vs TALF, Matthew Jozoff
We examine levered returns across fixed income, comparing ROEs for banks vs those available to private investors through the Term Asset-Backed Securities Loan Facility (TALF) program. Banks have the edge over TALF-funded investors, thanks to attractive deposit funding and lower capital requirements vs TALF haircuts. We find that private label securitizations, CLOs, and raw loans are most attractive for banks right now, generating above hurdle rate ROEs.

Crisis Watch V: Break On Through (To ‘The Other Side’): What we're following and what we’re thinking about, Stephen Dulake
We remain constructive on credit markets and think that the underlying message of policy announcements made on April 9 is that if companies really need the money but are struggling to get it through the various programs, the Treasury and Fed will find a way to modify them as necessary to get credit flowing to where it’s needed. The transition from a systemic risk environment to a more idiosyncratic one naturally lends itself to thinking about the implications for index tranche pricing and the market for index options. What investors are willing to pay for ‘quality’ and portfolio construction based on isolating credit factors is also relevant.

A Shopping List for the Fed: An estimate of corporate bonds eligible for the Fed’s secondary buying program and where they may focus, Eric Beinstein
In light of the Fed’s updated guidance last week on their High Grade bond buying programs, we estimated the eligible universe of securities for the Secondary Market Corporate Credit Facility (SMCCF) is $1.39tr (<5yr, Investment Grade rated, US companies, no banks). Of this, the Fed could, in theory, buy only up to $411bn to stay within current issuer limit guidelines (<10% of each issuers debt and 1.5% issuer limit). In our view, the current maximum SMCCF program size of $250bn is large enough for the eligible universe, especially once we factor in that the issuer limits are split with the primary bond program (PMCCF). How should the Fed divide up their capital? We reiterate our view that the Fed appears focused on the primary program, as this more directly helps issuers without more economic sources of funding. It is logical for the Fed to ask issuers interested in the primary program to indicate this before beginning secondary purchases, so that that their total purchase capacity at the issuer level is not taken up by secondary market purchases inadvertently.

Sector Level Views

COVID-19: Tracking activity impact through high frequency data, Mislav Matejka & Prabhav Bhadani
The COVID-19 activity tracker is a collection of high frequency data points from across the globe. In this report, we compile more than 15 alternative data indicators across several categories such as mobility trends, consumer spending patterns and industrial demand along with other financial and economic data points. The product is aimed at helping investors form a more timely picture of some of the key industries / segments most impacted by the spread of COVID-19 and related shutdowns.


Internet 1Q Earnings Preview: Reit AMZN as TOP IDEA, Raising NFLX Subs & PT, & Downgrading TWTR & CHGG; Multiple Estimate & PT Changes, Doug Anmuth
Heading into 1Q20 earnings, our Internet coverage universe is outperforming on a market-cap weighted basis, up 6% YTD vs. the SPX -14%. Internet companies span the gamut in a COVID-19 stay-at-home world with e-commerce and video streaming major beneficiaries, rideshare and online travel severely impacted, and online advertising somewhere in between as incremental engagement does not translate to more ad dollars in a low-demand environment.


Asia Banks: The new normal, a framework (part 1), Harsh Modi & Katherine Lei
Banks are being co-opted by policy makers in efforts to reduce economic damage from the global health issue. Capital, liquidity and regulatory preparedness (fiscal, monetary and macro prudential) are in place. Hence, banks are in a position to help rather than hinder economic healing. This involves primacy of employees, customers, communities, regulators and system stability over shareholders’ interests. Return on equity (RoE) will slowly gain priority, as ‘normal’ comes back; but not as much. In this note, we aim to create a thought framework that allows us to evaluate events, and pick bank stocks. Our starting point is to think about 2022 EPS and 5Y growth expectations, as well as changes in the next 18-24M, which will impact those expectations. | Privacy Policy | Online Activity Safeguards | Cookies Policy
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