The COVID Diaries: investor 7

The following interview is with an Australian-based fixed-income investor. It was conducted on 4 June 2020.

Does your business have a timeline for returning to office working – and are you looking forward to it?

We are back in the office already. We have a large office in terms of square metres per person and we are a relatively small team. We were set up with working from home and then began alternating people going into the office. Once restrictions began to ease, though, we could have everyone come in that wants to.

It is commonly accepted at this stage that Australia and New Zealand have done relatively well in the phase of the crisis where public health was the number one priority. Is it now time – at the margin at least – to change the emphasis towards reopening the economy?

Around the world countries are trying to balance lives and livelihoods. It seems to me that most places are just trying to keep the virus suppressed – although in New Zealand they are trying to eradicate it. The virus is novel so there is not a lot of experience with the exact measures needed to keep it suppressed and therefore how far restrictions can be lifted without sparking another outbreak.

The great advantage in Australia is that we have had very few cases; hence testing, contract tracing and isolation of the few cases we have are very effective in containing any outbreaks. This will likely allow us to open up restrictions more than other countries. Europe and the US have so many cases, and so many people in the population with the virus, that they largely have to rely on social distancing alone to keep the virus suppressed.

“I am less confident of a V-shaped recovery than the equity markets appear to be pricing in. Equity markets seem to be far too optimistic at this point, where there is still a long way to go and a lot to play out.”

Are you more or less optimistic about the crisis than you were during the early acceleration period of moving to home working and adding social distancing measures?

On the health front I am slightly more optimistic because it is becoming apparent that, if you are healthy and not elderly, your chances of dying from COVID-19 are quite low. If measures can be put in place for those who are vulnerable, the Australian experience is that you can control the health outcomes and minimise loss of life.

It also seems those that do get COVID-19 and recover, to my knowledge, do not have lasting effects. They seem to make a full recovery, which is also encouraging.

I am more pessimistic on the economic side. I am less confident of a V-shaped recovery than the equity markets appear to be pricing in. Equity markets seem to be far too optimistic at this point, where there is still a long way to go and a lot to play out. I think there will be some negative and long-lasting economic effects

What do you think about optimism in debt markets – is it justified by all the government support that has been injected?

All the governments around the world are trying to instil confidence because it is needed to get the economies of the world going again. You need business confidence for investment and you need consumer confidence for consumption. It can either become a virtuous spiral upwards or a vicious spiral downwards. Governments and central banks are communicating optimism for this reason, but the optimistic view communicated may not match the reality.

In debt markets, the RBA [Reserve Bank of Australia] has made it clear no ADI [authorised deposit-taking institution] will fail for liquidity reasons. The issue then, longer term, becomes one of solvency. But this is a long-term issue and we will just have to see how the economics play out for corporate defaults, and potential housing market depreciation and mortgage defaults. This is an unknown and seems some way down the track if it is to occur at all, particularly with regard to mortgage defaults.

When do you think you will next get on a plane? Are you looking forward to or dreading travelling again, for business and leisure?

I did have a holiday planned over summer but the airline it was booked with has gone bankrupt – and it is not Virgin Australia! This will be on hold. It was overseas so there is a big question over whether travel restrictions would have allowed it anyway.

For business, most of my travel is done by car and this has been curtailed. Many clients are working from home and it is difficult to arrange face-to-face meetings. For existing clients, Zoom and Teams meetings work well. But I am finding virtual meetings do not work as well when pitching for new business.

What are you most looking forward to being able to do again, as restrictions ease in the coming weeks and months?

The next thing on the horizon for me is playing squash again. Indoor sport has been grouped with gyms and is not yet open, but I am hoping it will be by mid-June. I have probably missed this the most.

KangaNews is your source for the latest on the COVID-19 pandemic’s impact on Australasian debt capital markets. For complete coverage, click here.