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There is also light at the end of the tunnel

Asia Analytica
Asia Analytica • 9 min read
There is also light at the end of the tunnel
The world is interconnected and hence, interdependent. The coronavirus is a global problem that requires global cooperation to get it under control.
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SINGAPORE (Apr 3): The world is still playing catch-up with the Covid-19 pandemic. In recent days, we have seen more governments, including India, the second-most populous country in the world, and the UK implementing nationwide lockdowns as the outbreak escalates.

The latter has had to abandon its previous strategy, of developing herd immunity by allowing the virus to spread through at least 50% to 60% of its population, because the grim projections were simply untenable.

The US, meanwhile, has leapfrogged to the top of the table as the country with the highest number of confirmed cases in the world. Its response, so far, is a patchwork of policies, with varying degrees of lockdowns dictated by state governments.

President Donald Trump has, it appears reluctantly, extended the federal government’s social distancing guidelines until the end of April.

With the number of cases rising rapidly, public healthcare systems are straining under the pressure. Based on the current trajectory, things will certainly get worse before they get better. Still, we would never underestimate humanity’s resilience.

The private sector, for one, is putting its creativity and versatility to good use in these crisis times. In the US, carmaker Ford Motor is partnering with General Electric and 3M to produce urgently required medical equipment and supplies — such as ventilators, powered air-purifying respirators, surgical masks and other personal protective equipment — including developing new designs that can utilise “off the shelf” parts from the companies.

UK-based Dyson, well-known for its vacuum cleaners and hand dryers, has designed and is set to build 10,000 ventilators for the British government. A breathing aid produced by the Mercedes F1 team in collaboration with University College London is undergoing trials. LVMH, the owner of luxury brands such as Christian Dior and Louis Vuitton, is making hand sanitisers — from its inventory of purified water, ethanol and glycerine — for the French health authorities and hospitals. The list goes on.

The road ahead is long. Charts 1 and 2 show the number of daily new cases in some of the worst-affected countries and globally. The lines are all more or less bellshaped. That is, they go up, hit a peak and fall back down. But there are big differences in the steepness of the rise and time to peak and trough, which are determined by each country’s response to the outbreak. In China, the initial epicentre, the cycle played out in roughly a month’s time. After some initial confusion, the Chinese government responded aggressively to suppress the outbreak. By end-March, the country was reporting days with zero cases through local transmission.

We see a similar time frame in South Korea, which experienced one of the first major outbreaks outside China. The country undertook extensive testing very early, which allowed it to quarantine carriers (including those with mild and no symptoms) and thus, limit the viral spread. It, too, has been reporting far fewer cases of late.

In contrast, the cycle is taking longer to play out in Italy. Total cumulative cases are higher than that in China despite its having a much smaller population. This is due in big part to the indecisiveness of its initial response. Because it failed to arrest the virus early through widespread testing and quarantines, the virus was allowed to spread to more of its population nationwide. Still, the recent number of daily new cases is off the peak. Germany, Spain and France, too, appear to have reached, or are nearing, the inflexion point. So, we know there is light at the end of the tunnel.

The world is interconnected and hence, interdependent. The coronavirus is a global problem that requires global cooperation to get it under control. But because each country is responding with measures of differing degrees and at different paces, we see the outbreak cascading from one country to another. When one country gains control, another flares up. Even successful containment can be fleeting given the risk of imported cases.

Countries such as the US, the UK and India are still in the early stages of their cycles. They started testing later and at a much slower pace. But at some point, these too will end. However, the uneven containment suggests that the timeframe to a global sustainable recovery will be longer than many expected and unlikely to be “V shaped”, as we had hoped.

Therefore, it is very important to protect the productive capacity as best we can, so that we can snap back once this virus is contained. This is where the massive fiscal and monetary policies come in, to sustain businesses, jobs and incomes.

Realistically, no country can maintain strict lockdown measures for an extended period of time, given the extreme economic and social costs. Neither can any one country shut its borders to the rest of the world indefinitely. We were woefully unprepared heading into this crisis. It is crucial that we be much more prepared in terms of the exit strategy.

Containment measures that were undertaken in China and South Korea proved successful and their experience provided invaluable guidance for the rest of the world. Now, both countries are attempting to restart their economies. Singapore and Taiwan, too, appear to be keeping the virus under control without resorting to full lockdown measures.

What these countries do now will be the playbook for how social distancing and restrictive movement measures can be relaxed and which, if any, risk fresh waves of infection.

There is still much that we do not know and understand about the coronavirus. But the data hints that culture and social behaviour such as civil obedience do factor into the effectiveness of controlling the outbreak. For example, Japan is reporting comparatively fewer cases despite minimal restrictive measures. That said, this could also be a function of under-testing and the virus may be more widespread than the numbers indicate. Only time will tell.

Clearly though, more authoritarian regimes are better equipped for handling a health crisis. China and, to a lesser extent, South Korea, Taiwan and Singapore, have successfully contained the outbreak through the use of intrusive surveillance, mobile phone/banking location tracking and enforced quarantines.

Western liberal democracies have balked at the most draconian of these measures, though some like Italy have gone further than others. Still, increasingly more countries are embracing the use of mobile data as a means for travel and contact tracing, including Germany, the UK and even the US.

During times of war — and we are at war — public interest must take precedence over individual freedom. The worry is what happens once the war is over. Will all the surveillance measures and data collected be removed and erased, or will some be covertly embedded into our everyday lives?

For that matter, how and when do we define the outbreak to be over to even begin their removal?

The issue of government surveillance and personal data privacy — not unlike that with Big Tech companies such as Google and Facebook, at which privacy laws are only starting to address — is surely worthy of future debates.

Technology — smartphones, a robust online universe and social media platforms, high-speed internet connections and cloud computing — has been integral in helping us maintain some semblance of normalcy amid the social isolation.

Many of us are now shopping for food, groceries and other necessities online, ordered and paid for without ever having face-to-face contact. Entertainment is available via multiple streaming services such as Netflix and Disney+, even if we cannot go to the theatres.

Meanwhile, families and friends are keeping in touch via video calls and social media. We have even read news reports of people holding virtual weddings and graduation ceremonies in video games.

Technological advancements have enabled some of us to work from home. Teachers are conducting classes via the internet.

The recent G20 summit was held through video conferencing. So too are many business meetings. Important announcements are disseminated through live streaming on Facebook and YouTube.

Technology has also been key in the coronavirus fight. Drones have been deployed to deliver food and patrol lockdowns as well as disperse crowds, and robots used to sanitise hospitals and deliver medical supplies.

Supercomputers, artificial intelligence, big data and analytics are being used to give remote health screenings, diagnoses and consultations; undertake surveillance including facial recognition to track potentially infected people and map the outbreak geographically; perform rapid scans and diagnostics; speed up research for treatment and vaccines and so on.

Thanks to bio-technological innovations, we are already getting improved test kits and greater testing capacity, which means more effective isolation, and with better practice of social distancing, the curve will flatten.

And we will have a vaccine, the ultimate endgame, probably within the next 12 to 18 months. Human trials are already underway. A vaccine will greatly reduce the risk of a future pandemic should the Covid-19 become endemic.

When all is done and dusted, some of our behavioural changes will very likely persist. They will reinforce secular trends that were already unfolding before the outbreak.

These include buying groceries online instead of from wet markets, switching from cash to digital payment and virtual banking, remote working, virtual classrooms and telehealth systems as well as the transition to cloud, mobile and web-based software platforms. The massive disruptions to global supply chains and logistics will spur investments in digital infrastructure, automation, robotics, drones and 3D printing.

The Global Portfolio gave back some of the previous week’s gains, falling 2.9% for the week ended April 2. Shares for Lennar, Builders FirstSource and Boeing continue to be volatile amid heighted uncertainties.

On the other hand, Microsoft, Qualcomm and ServiceNow fared better, ending higher for the week.

Total portfolio value now stands at -11.6% since inception. By comparison, the benchmark MSCI World Net Return Index is down by 11.5% over the same period.

Disclaimer: This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks, including the particular stocks mentioned herein. It does not take into account an individual investor’s particular financial situation, investment objectives, investment horizon, risk profile and/or risk preference.

Our shareholders, directors and employees may have positions in or may be materially interested in any of the stocks. We may also have or have had dealings with or may provide or have provided content services to the companies mentioned in the reports.

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