2020-04-15
(26 Pages, 41 graphs and tables)
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Numbers are no longer important: There exists a variety of standards and practices in reporting infection numbers. Many infections are undetected, self-healed and unreported. As long as severe cases do not overrun the emergency room, such practice has no fallacies, except…
Silent infectees continue to infect others: This means the decision to unlock will be difficult. “Partial lockdowns” or “rotating lockdowns” will lock down the economy for a longer period of time than a “precise lockdown”, which means the economic cost will incur nevertheless;
Lockdown is still the only viable way: Most antiviral drugs are only effective at early stage with various side effects. Most early stage infection ends up self-healing anyway. Late stage is often incurable. Unless (1) a drug can be effective with low side effects easy means and easy to delivery, selling cheap and mass producible, or (2) an effect treatment of cytokine storm can be developed, lockdown is still the only workable approach. Vaccine will also take long time;
Developing countries will be the worst hit: Due to the inaccuracy of data, we must look at alternative indicators like (1) death toll, (2) celebrity and noble infections, (3) test completeness to fathom the true depth of pandemic in each country. All known facts point to severe casualty at the developing world, despite a lack of data showing so;
China stands to benefit from pandemic in the LR: Countries who are unable or unwilling to (1) mobilize their society to enforce a lockdown and (2) maintain stability at time of crisis, will lose out to those who can. All being equal, the pandemic will extend China’s timeline in retaining manufacturing. It spurs investment in medical infrastructure and manpower. It can bring back talents;
Coronavirus will not change the basics of US-China standoff: The US-China standoff will remain a contest of speed between (1) how fast China develops its high-tech industry and (2) how fast US moves its supply chain out of China. China starts at a disadvantage and the pandemic will not change the outcome, nor calculation.
Solid fundamentals: On the condition that no financial crisis has arisen, fundamentals of Chinese Internet companies remain sound with the pandemic under control at home. Sector top pick: E-commerce; Sector top avoid: Advertising;
Italy holds particular importance to the Western countries: Data shows that at the time of the peak, daily new infected over daily recovered ratio stood ~7.0. Italy now at ~7.4. If so, Italy is ~1 weeks from hitting its peak;
The shoes are yet to drop for UK and Japan: Judging from sources of import cases to China, UK has already become a major infection region. Japan might have escaped outbreak but may not continue so, thanks to population density;
Big countries like US and Canada might be able to practice regional or rotating lockdowns: Rational behavior will prevail once the market sees and learns from Italy. However, to work out logistics of a regional or rotating lockdown isn’t easy;
The worst fear has been priced into the market: The worst case is long term social degeneration, which can only happen if Western countries cannot maintain order. Now the uncertainties are in how bad and whether savable (1) UK and Japan can be, (2) developing country can be. The market may revisit lows if answers prove unsettling.
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