Deloitte Economics' Coronavirus Impact Monitor - Despite renewed stock market volatility and indications of increasing loan defaults, CFOs remain ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Deloitte Economics’ Coronavirus Impact Monitor Despite renewed stock market volatility and indications of increasing loan defaults, CFOs remain optimistic in the face of a second wave 14th edition, 30 October 2020
Coronavirus outbreak
The second wave has arrived in Denmark, while previously affected countries lose infection
momentum
7-day rolling average new daily confirmed COVID-19 cases for selected countries
• COVID-19 is continuing its spread across the world, with more
than 44 million confirmed cases in 188 countries. About 1.2m US and Brazil Spain and France Denmark and Sweden
people have lost their lives. 40.000 1.400
70.000
• Cases of the disease are surging in this, the second wave 35.000 1.200
60.000
# Daily cases
across Europe, signalling that the relaxation of restrictions 30.000
1.000
has been the determinant for the severity of this second 50.000
25.000
800
wave. 40.000
20.000
600
• Europe remains the epicentre of new COVID-19 outbreaks 30.000 15.000
according to the WHO. As we witness the surge in cases from 20.000 10.000
400
the second wave in Europe, the defining feature of 200
10.000 5.000
transmission rates stems from the rapid action of each state.
The United States, France, Denmark and Sweden all are 0 0 0
1 Mar 1 May 1 Aug 28 Oct 1 Mar 1 May 1 Aug 28 Oct 1 Mar 1 May 1 Aug 28 Oct
suffering from a vast increase in cases. In Denmark, 1,191
new cases have been registered the last 24 hours, which is 7-day rolling average new daily confirmed COVID-19 deaths for selected countries
the highest number so far.
US and Brazil Spain and France Denmark and Sweden
• Thankfully, there has not yet been a corresponding increase 3.000 1.200 120
in deaths for the most part. However, as the health system
becomes more strained, this may affect disease management 2.500 1.000 100
and patient care. 2.000 800 80
•
# Daily deaths
As of 23 October, the Danish government has instituted
1.500 600 60
heightened measures of restriction. The new restrictions
include face mask requirements and gathering 1.000 400 40
restrictions and will be adopted until at least the 2
500 200 20
January 2021.
• This is likely to affect what is traditionally the largest retail 0 0 0
1 Mar 1 May 1 Aug 28 Oct 1 Mar 1 May 1 Aug 28 Oct 1 Mar 1 May 1 Aug 28 Oct
shopping period of the year, as well as affecting many citizens
in their winter travel and Christmas holidays. US Brazil Spain France Denmark Sweden
Source: World Health Organisation (WHO), the Danish Health Authority (Sundhedsstyrelsen), Danske Bank, Deloitte analysis
Coronavirus Impact Monitor – 30 October 2020 Page 2 Deloitte Economics © 2020
Impact on financial markets
A sharp rise in cases across Europe and elsewhere has been driving down stock prices over recent
weeks, while a large sector divergence continues
Equity markets: Sectoral indices in Europe1
• European equity markets continue to show sector divergence.
• Medical & Pharmaceuticals stocks, and especially Technology Major outbreak in Europe
stocks, continue to hold high valuations compared to pre- 120
outbreak levels.
110
(2 Jan 2020 = 100)
105
• However, after the recent stock market falls, only the
Sectoral indices
100
95
Technology Sector is showing pricing levels higher than at the 90
beginning of the year. 80
• After regaining some ground over the summer, financial stocks 70 71
66
since fallen back and are now 29% below January levels. 60
50 53
• The Transport industry, including airlines, continues to be
40
affected by the virus-related travel restrictions, and an 30 Dec
1 Jan 1 Feb 1 Mar 1 Apr 1 May 1 Jun 1 Jul 1 Aug 24 Sep 1 Oct 1 Nov
accelerating number of cases across the globe is once again 2019
dampening industry outlooks – the Transport index is down by Transport Energy Medical & Pharmaceuticals Financial Technology
34% since the beginning of 2020.
OMX C25 Index, median quarterly net income, DKKm2
• For similar reasons, expected demand for energy is falling again,
and gains made between March and July have largely been 2,000
eroded – the index is now down by some 47% since the
1,500
beginning of the year.
Quarterly net income
• The lower right-hand chart shows the development in quarterly 1,000
net income results for OMX C25 Index constituents.
500
• Following a sharp drop in Q1 2020, net income results for Q2
2020 indicate that Denmark’s largest companies have made a 0
swift recovery with expectations pointing to a continued
recovery in Q3 and median quarterly net income above pre- (500)
Q1 2019A Q2 2019A Q3 2019A Q4 2019A Q1 2020A Q2 2020A Q3 2020 A/E Q4 2020E Q1 2021E
outbreak levels over the remainder of 2020.
75th percentile Median 25th percentile
Note: 1) Refinitiv European sectoral price indices measured by Refinitiv (Thomson Reuters), 2) A=Actuals; E=Expected. Q3 2020 numbers are a blend of actuals and estimates
Source: Thomson Reuters Eikon
Coronavirus Impact Monitor – 30 October 2020 Page 3 Deloitte Economics © 2020
Danmarks Nationalbank survey – Denmark
Banks report decrease in loan demands from existing corporate customers while seeing increase in
proportion of impairments and losses
Quarterly lending survey
• The quarterly lending survey from Danmarks Nationalbank
reports the loan demand and proportion of impairments from Loan demand from existing customers Proportion of impairments and losses
existing corporate customers based on responses from Danish
banks. 100
• In Q3 2020, 13 out of 19 banks report that loan demand from
existing corporate customers has decreased since Q2, while 50
Increase
eight banks report that the proportion of impairments and
losses has increased. 0
• The decrease in loan demand contrasts with the expectations
indicated by the banks in the previous quarter regarding their Decrease
-50
expectations for the current quarter, which indicate that the
Net figure Expectation
impact of the virus in the second wave has not yet manifested
-100
itself in terms of increased liquidity needs. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
• The decrease in net figure, which indicates the banks’ answers
Annual repayment percentages on Danes' mortgage loans
weighted by their respective market shares, is the largest
decrease since Q4 2011, which the banks suggest to be due to All mortgage loans
Mortgage loans with repayments
governance assistance packages leading to a lower liquidity
need, while companies have been more reluctant to invest. 5.1%
• The proportion of impairments and losses has increased from 3rd quarter 3rd quarter 4.4%
Q2 to Q3, in line with expectations, and six out of the eight 2019 2020 4.0%
banks expect a further increase in impairments and losses in
Q4. 2.8%
2.4%
2.1%
• This is combined with an increase in the proportion of mortgage
repayments from households, as the low interest rate
environment has attracted residential borrowers to invest more
in their home equity. Total Fixed Variable Total Fixed Variable
rate rate rate rate
Note: 1) Corporate customers in the lending survey cover 'Private non-financial corporations' and 'Personally owned companies'
Source: Danmarks Nationalbank
Coronavirus Impact Monitor – 30 October 2020 Page 4 Deloitte Economics © 2020
CFO survey – Europe
Autumn 2020 (Q3) – optimism on “financial prospects” improves drastically
• The optimism on financial prospects for CFOs who answered
Deloitte's survey has largely increased since Q1, which
coincided with the first global wave of COVID-19.
• The global economy witnessed a large selloff across most of the
financial indices in March and April, which were based on a lot
of uncertainty and gloomy forecasts.
• The relatively sturdy economy in Europe, backed by large
government capital injections, has enable European businesses
to maintain fairly stable operations throughout the wave of
lockdowns and travel restrictions.
• Denmark itself has fared much better than average, compared
with its European counterparts, on the back of a direct action
COVID policy, and timely government fiscal intervention.
• CFOs surveyed in Denmark responded with more assurance on
expectations due to the transparency from the government, as
well as strong fiscal support from government aid programmes,
and a larger reliance on service, rather than goods-based
industries.
• Danish CFOs have also held the lowest levels of ”less optimism”,
which provides a sense that there was adequate assessment of
the financial fall-out from COVID-19 in Q1 this year; juxtaposed
to Italian and Spanish CFOs who maintain very high levels of
poor financial outlooks.
Source: Deloitte CFO Survey 12th Edition
Coronavirus Impact Monitor – 30 October 2020 Page 5 Deloitte Economics © 2020
Development in national debt to GDP – Denmark
Q2 shows high increase in EMU debt-to-GDP ratio
• In Q2 2020, the national debt to GDP saw a high increase
compared to recent years, which illustrates the impact of the Danish debt-to-GDP ratio since 2008
virus in terms of both GDP and EMU debt levels.
• With a debt level of 41% of GDP, the ratio is approaching levels
similar to those seen in the years after the financial crisis. This is
an increase of 8% in a single quarter, just short of the 9% jump
in Q3 to Q4 2008.
• This high increase in debt, directly attributable to COVID-19, is
worrisome, as it may only be the beginning of financing needs
for the Danish government should any further waves of COVID
affect the broader economy.
• As a result of both the rapid increase in borrowing needs and
the decline in GDP across OECD economies, the central
government marketable debt-to-GDP ratio for the OECD area is
projected to increase by 13.4 percentage points to around 86%
in 2020, the largest increase in a single year since 2007.
• Nevertheless, Denmark is still well placed to cushion the impact
of the COVID induced recession, particularly for small and
medium businesses through many different types of aid
packages and fiscal schemes.
• It should be anticipated that debt levels will continue to rise
over the next one to two years at a minimum. It remains to be
seen whether this will have any material impact on the Danish
government's credit rating.
Source: Danmarks Statistik, OECD
Coronavirus Impact Monitor – 30 October 2020 Page 6 Deloitte Economics © 2020Coronavirus heatmap
Deloitte Economics’ view on the short-term outlook across selected sectors in Denmark
Consumer Denmark
• Hospitality and furnishings companies face a lower intended spend by
consumers. Sector
Energy & Resources Short term Outlook
• Coronavirus continues to affect electricity prices, while coal and gas are at
pre-crisis levels.
Financial Services Consumer Moderate impact Moderate recovery
• Valuation recovery stagnates, and the sector contemplates long-term
changes.
Industrials Energy & Resources Moderate impact Moderate recovery
• Overall positive Manufacturing outlook with record-high PMI numbers and
strong Q3 growth.
Financial Services High impact Moderate recovery
Life Science & Health Care (LSHC)
• Medical & Pharmaceuticals stocks have been performing well and are well
above pre-outbreak levels. Industrials Moderate impact Moderate recovery
Real Estate
• Despite COVID-19, the Real Estate M&A market is expected to drop only by
Life Science & Health
10% in 2020. Neutral/Low impact Growth opportunities
Care
Technology, Media & Telco (TMT)
• TMT sectors have shown relative resilient to COVID-19, as the world has
gone digital. Real Estate Moderate impact Moderate recovery
Transport
• The transport market is in recovery following the opening of several Technology,
Neutral/Low impact Growth opportunities
markets. Media & Telco
Please note that variations in industries may occur. We refer to pages 10-17
for in-depth coverage of developments in selected industries. Transport Moderate impact Slow recovery
Coronavirus Impact Monitor – 30 October 2020 Page 7 Deloitte Economics © 2020Key messages
CFOs maintain optimism in the face of a second wave even if any durable economic recovery
strongly hinges on our ability to control the COVID-19 pandemic
• COVID-19 is continuing its spread across the world, with more than 44 million confirmed cases in 188 countries. About 1.2m people have lost their lives.
• In Denmark, the number of confirmed cases has increased rapidly during the last weeks, reflecting that a second wave has arrived in Denmark. 1,191 new cases have been
registered the last 24 hours, which is the highest number so far. The positive percentage, however, is decreasing, which reflects the relatively large amount of tests being
conducted.
• As a consequence, the Danish government has instituted heightened measures of restrictions. The new restrictions include face mask requirements and gathering
restrictions and will be adopted until at least the 2 January 2021.
• The sharp rise in cases across Europe and elsewhere has been driving down stock prices over recent weeks, while a large sector divergence continues. After the recent
stock market falls, only the Technology Sector is showing pricing levels higher than at the beginning of the year. Last month also Medical & Pharmaceuticals stocks hold
high valuations compared to pre-outbreak levels.
• The quarterly lending survey from Danmarks Nationalbank reports a decrease in loan demands from existing corporate customers and an increase in proportion of
impairments and losses.
• According to Deloitte’s recent CFO Survey, however, CFOs remain optimistic in the face of a second wave.
• To ease the severe impact of covid-19 on the economy governments all over the world have introduces major aid packages and credit measures, which have been
extended in the wake of the second wave. This is reflected in the development in national debt, which in Q2 shows high increase in EMU debt-to-GDP ratio.
• Deloitte Economics will continue monitoring the impact of the coronavirus in Denmark and globally. Find our updates here
For questions on the contents of this report, please contact:
Majbritt Skov Tinus Bang Christensen Peter Lildholdt
Partner, Head of Deloitte Economics Partner Vice President
Mobile: +45 30 93 44 63
Mobile: +45 30 93 54 71 Mobile: +45 40 35 25 36
tbchristensen@deloitte.dk
maskov@deloitte.dk plildholdt@deloitte.dk
Disclaimer: The information in this document is intended for knowledge sharing only.
Coronavirus Impact Monitor – 30 October 2020 Page 8 Deloitte Economics © 2020Industry outlook
Consumer Page 10
Energy & Resources Page 11
Financial Services Page 12
Industrials Page 13
Real Estate Page 14
Technology, Media & Telco (TMT) Page 15
Transport Page 16
Public Page 17
Coronavirus Impact Monitor – 30 October 2020 Page 9 Deloitte Economics © 2020Consumer Energy & Financial Industrials Real Estate TMT Transport Public
Resources Services
Industry outlook: Consumer
Hospitality and furnishings companies face a lower intended spend by consumers
Highlights from the industry (as of 28 October 2020)
Based on top 10 companies
Deloitte State of the Consumer Tracker
110.0 105.7
97.7 Consumers’ intention to spend more during the next four weeks
100.0
Indexed share price
Clothing/ Household Restaurant/
89.2 Electronics Furnishings Groceries Medicine
90.0 footwear goods takeout
81.2
80.0
70.0
-15% -16% -27% 21% 17% 10% -21%
60.0
28 Dec 28 Jan 28 Feb 28 Mar 28 Apr 28 May 28 Jun 28 Jul 28 Aug 28 Sep 28 Oct Consumers’ intended purchase channel
19 20 20 20 20 20 20 20 20 20 20
1 2 3
Retail Hospitality Consumer MSCI World
59% 53% 66% 64%
82% 79% 82%
Retail index has moved from index 105.2 to 105.7 (since last update). 12% 12%
10% 12%
30% 34% 24% 7% 7% 14% 8% 24%
Hospitality index has moved from index 82.7 to 81.2 (since last update). 11% 11%
Consumer index has moved from index 90.4 to 89.2 (since last update).
In store Online - Pickedup Online - Delivered
Trading multiples and economic outlook
Index: MSCI World Retailing Index (top 10 companies) Latest consumer confidence index4 (as of September 2020) has increased to
Historical averages Coronavirus impact
(EV/FY0 EBITDA) (EV/FY0 EBITDA) 98.8, illustrating a positive development, but still indicating a somewhat
doubtful attitude towards the future economic development.
-3.7x
101
12,7x 14,2x 14,5x 17,0x 98.8
13,3x
98
95
Sep-06 Sep-08 Sep-10 Sep-12 Sep-14 Sep-16 Sep-18 Sep-20
10y avg. 5y avg. 3y avg. Jan 1, 2020 Current
Consumer confidence index (OECD-Europe)
Note: 1) MSCI World Retailing Index; 2) MSCI World Consumer Services Index; 3) MSCI Consumer Staples Index; 4) Based on OECD – Europe region
Sources: Capital IQ; MSCI; European Parliament; Deloitte State of the Consumer Tracker
Coronavirus Impact Monitor – 30 October 2020 Page 10 Deloitte Economics © 2020Consumer Energy & Financial Industrials Real Estate TMT Transport Public
Resources Services
Industry outlook: Energy & Resources
Coronavirus continues to affect electricity prices, while coal and gas are at pre-crisis levels
Highlights from the industry (as of 28 October 2020)
140 Hydropower generation
120 − Prior to Corona, electricity prices were already pressured in the Nordics due to
a warm winter, which increased the generation capacity of Norwegian
100
hydropower plants.
80
− Further, the mild winter decreased demand for electricity.
60
Lockdown affects demand
40 − The coronavirus lockdown negatively affected the demand of public
20 institutions, private individuals and corporations.
1 jan 20 1 mar 20 1 maj 20 1 jul 20 1 Sep 20 1 Nov 20
Carbon market prices
Natural gas TTF, spot Coal API2, spot Nordic electricity future, Q4-20 − Lower emissions of CO2 and other greenhouse gasses led to a decrease in
carbon prices.
Mild winter puts pressure on Nordic electricity prices prior to Corona crisis.
− Coal became cheaper, lowering overall prices, as coal is marginally price
Electricity demand decreased marginally due to coronavirus lockdown.
setting. This creates a self-enforcing effect, which drives down prices even
Significant drop in carbon emissions resulting in lower prices. further.
Economic outlook
Selected futures
-40.1%
Both coal and gas prices are back to pre-COVID levels, however electricity prices
-41.7%
-6.7% continue to be depressed. Q4 Nordic electricity futures were c. 40% lower at the
35 33 end of Q3 compared to the beginning of the year.
21 19 25 23
The impact on electricity producers continues to be significant, but we expect
prices to rebound, as the marginal cost of conventional energy sources increases.
Nordic power, Q4-20 Nordic power, FY-21 EUA, Dec-20
Jan 1, 2020 Oct 28, 20201
Note: 1) As of end September for Nordic Power, Q4-20
Source: Thomson Reuters Eikon
Coronavirus Impact Monitor – 30 October 2020 Page 11 Deloitte Economics © 2020Consumer Energy & Financial Industrials Real Estate TMT Transport Public
Resources Services
Industry outlook: Financial Services
Valuation recovery stagnates, and the sector contemplates long-term changes
Highlights from the industry (as of 22 September 2020)
120 Banks and consumer finance
110 [97.8] − Capital cushions among banks have proven to be adequate for most of the economic
scenarios for 2020, laid out by central banks. Regardless, they must rebuild, and in the
100 [82.3]
short-term, banks should expect credit losses on a scale not seen since the Global
90 [82.3] Financial Crisis (GFC). Going forward, banks may undertake overhauls of their business
80 models. In the current low-rate and low-growth environment, not all banks will succeed
[81.5]
70 with such transformation, which may prompt consolidation in the industry.
60 [76.4]
50
Insurance
[59.9] − Allianz SE expects global insurance premium income to shrink by 3.8% in 2020, which is
40
three times the pace witnessed in the GFC. However, insurers may benefit from greater
30
risk awareness. Demand for more comprehensive and simpler health insurance may
1/31/20 2/28/20 3/31/20 4/28/20 5/29/20 6/30/20 7/31/20 8/31/20
increase, and with travel expected to only gradually recover from the collapse during
Nordic Banks Nordic Insurance European AM lockdowns, the industry may undertake product improvements and premium changes in
Nordic Consumer Finance Nordic DCA MSCI World several areas.
While the average world market has almost returned to price levels that Asset Management
preceded the COVID-19 crisis, the Financial Services sector remains under − COVID-19 caused a halt to a long and consistent annual growth trajectory for asset
pressure from renewed concerns of new COVID-19 outbreaks. managers, presenting several imperatives for their businesses. These include developing
Nordic banks and asset managers have seen market value stagnate, adding differentiated product offerings (e.g., sustainable investing), providing advice supported
pressure to the gains made over the summer. Consumer finance and DCA have by strong digital capabilities, improved approaches to cost cutting, streamlined service
shown the largest gains in market value since their mid-March low point. deliveries and transformation of operating models.
Trading multiples and economic outlook
Index: S&P Capital IQ1
Market capitalization (1 Jan = index 100) Coronavirus impact (P/BV)3 Loan provisions related to COVID-19 were front-loaded in H1 2020, but with
16-03-20 22-09-20 -0.4x government support schemes expired, and newly instituted lockdown measures in
place throughout the Nordic region, increases in actual losses are expected in the
82 81 82 1,8x
69 65 67 76 60 1,4x coming quarters.
52 43 1,1x
While not on the same scale as the GFC, the economic consequences of the pandemic
have proved to be severe. The effects of COVID-19 may restructure the Financial
Services sector in several dimensions, including competitive structure, sources of
Nordic European Nordic Nordic Nordic Jan. 1, Mar. 16, Sep. 22,
Banks AM Consumer Insurers DCA2 2020 2020 2020
growth, innovation, customer interaction, and digital technologies.
Banks
Notes 1) Indices are from Stoxx Europe 600 Financial Services and MSCI World; 2) DCA: Debt Collection Agencies; 3) P/BV is measured as average of Nordic Insurers, banks, and DCA.
Sources: A. Allianz Insurance Report 2020: https://www.allianz.com/en/economic_research/publications/specials_fmo/01072020_Insurance_Report.html
Coronavirus Impact Monitor – 30 October 2020 Page 12 Deloitte Economics © 2020Consumer Energy & Financial Industrials Real Estate TMT Transport Public
Resources Services
Industry outlook: Industrials
Overall positive Manufacturing outlook with record-high PMI numbers and strong Q3 growth
Share price development year-to-date Manufacturing PMI level for the Eurozone reaches 26-month high in October
Indexed share price as of: October August
140
29 Oct 24 Sep 53.3
53.2 September July
120 US 53.1
126.6 122.0
50.9
100 103.3 108.5 The two-speed economy
99.3 98.3 continues through October,
53.3
80 54.1
83.5 85.8
UK with Manufacturing being
55.2
60 53.3 driven by strong order inflow,
while the service sub-
40
54.4 industry realises excess
1 Jan 20 1 Mar 20 1 May 20 1 Jul 20 1 Sep 20 1 Nov 20
53.7 capacity, leading to ongoing
Eurozone 51.7
Industrials Materials Automotive MSCI World 51.8 cut of employment.
Indices have dropped in recent days driven by COVID-19 second wave and
58.0
election uncertainties. 56.6
IHS Markit Manufacturing PMI:
Germany 52.2 Index =50: No change
However, futures jumped on 29 Oct, as the US economy notches record growth in
51.0 Index 50: Expansion
Trading multiples
MSCI World Industrials Index MSCI World Materials Index MSCI World Automotive Index
Historical averages Coronavirus impact Historical averages Coronavirus impact Historical averages Coronavirus impact
(EV/EBITDA) (EV/EBITDA) (EV/EBITDA) (EV/EBITDA) (EV/EBITDA) (EV/EBITDA)
-1.5x +1.3x -0.2x
13.1x 14.0x 13.8x 12.3x 10.5x 11.7x 12.0x 11.8x 13.1x 10.2x 9.9x 10.0x 11.1x 10.9x
11.7x
10y avg. 5y avg. 3y avg. Jan 1, 20 Current 10y avg. 5y avg. 3y avg. Jan 1, 20 Current 10y avg. 5y avg. 3y avg. Jan 1, 20 Current
Since last update (24 September 2020), the Since last update (24 September 2020), the Since last update (24 September 2020), the
EV/EBITDA multiple is down from 12.9x to 12.3x. EV/EBITDA multiple is down from 13.8x to 13.1x. EV/EBITDA multiple is up from 10.7x to 10.9x.
Note: 1) Data as of 29 October 2020
Source: Capital IQ; MSCI World Indices; IHS Markit; Bloomberg
Coronavirus Impact Monitor – 30 October 2020 Page 13 Deloitte Economics © 2020Consumer Energy & Financial Industrials Real Estate TMT Transport Public
Resources Services
Industry outlook: Real Estate
Despite COVID-19, the Real Estate M&A market is expected to drop only by 10% in 2020
Highlights from the industry (as of 28 October 2020)
110 2.0% General recovery from COIVD-19, but other thunderstorms are threatening
100 1.8% − Except from certain sectors, such as Transportation, Hospitality and
Tourism, the industry as a whole is recovering.
(2 Jan 2020 = 100)
Stock price index
90 1.5%
Interest rate
− However, there is still uncertainty about the potential change to taxation
80 1.3% of properties from 2023, and recently the government has announced
that the new public valuation model of commercial properties will be
70 1.0%
postponed, leaving even more uncertainty about taxation.
60 0.8%
M&A market expected to drop by c. 10% in 2020
50 0.5% − Despite a troublesome Q2, the first three quarters of 2020 are about at
Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 same level as 2019. However, Q4 will not be as good as 2019.
STOXX 600 Real Estate Index Danish long-term mortgage rates
− In total, the Danish RE M&A market will reach c. DKK 55bn in 2020
The leading real estate index has been fixed on 80 for a while, which may indicate that it will compared to DKK 60bn in 2019.
take some time before we are back at pre-COVID-19 level. − It seems that there is general consensus that housing prices will decrease
However, interest rates are now below pre-COVID 19 level, supporting the Real Estate M&A in Q4. However, the supply of especially apartments in major Danish
market. However, due to uncertainty about the impact of second wave, we expect more cities is back to pre-2007 level, while demand is still strong.
volatility.
Trading multiples and economic outlook
Index: Custom weighted average index1 Price multiples are almost at pre-COVID-19 levels, and in general the major listed RE
Historical averages (EV/EBITDA) Coronavirus impact (EV/EBITDA) companies are well-positioned to handle the crisis.
-1.9x
As interest rates may continue at a record low level, Real Estate assets will continue to be an
27.6x 25.4x 27,8x 30,7x 28,8x attractive asset class. The COVID-19 crisis proved the resilience of the asset class, and we
expect this to continue.
Despite COVID-19 and uncertainty about future taxation, the RE M&A market is almost at
10y avg. 5y avg. 3y avg. 1 Jan 2020 Current 2019 level. In case there will be a reasonable solution to the liquidity issue from the new
proposed taxation model , we believe that 2021 will be at 2020 level.
Note: 1) Based on Collier International, Patrizia AG, Agate Ejendomme, Jeudan A/S, and Park Street Nordicom
Source: Finans Danmark, Thomson Reuters Eikon, Capital IQ, Colliers International, Danmarks Statistik, Konjunkturanalyse 2019, and Cushman Wakefield RED
Coronavirus Impact Monitor – 30 October 2020 Page 14 Deloitte Economics © 2020Consumer Energy & Financial Industrials Real Estate Transport Public
Resources Services TMT
Industry outlook: TMT
TMT sectors have shown relative resilient to COVID-19, as the world has gone digital
Highlights from the industry (as of 29 October 2020)
130 TMT perceived as a defensive sector, which has less to lose from COVID-19
120 113
108 Telecom: Spend among consumers is often within a contract; demand is up; need
110
106 is not discretionary (new cars) or constrained (leisure).
100 98
90 Media and Entertainment: Financial impact varies across sub-sectors. Media
80 consumption up (e.g., Netflix, Disney+), but willingness/ability to pay may be
70 constrained, as economic outlook exacerbates. Events (consumer, business)
60 mostly heavily restricted; cinemas, theatres, museums mostly closed. TV and
1 Jan 20 29 Oct 20 movie production mostly halted. Theme parks mostly closed.
Information Technology1 Communication Services1 Media and Entertainment1 MSCI World
Technology: Some segments (e.g., robotics, communication software) seeing
TMT companies are trading above the overall equity market. record demand; digital transformation being accelerated; companies catering to
SMEs may suffer from customer liquidity.
Media and Entertainment quickly recovered after the shockwave on the stock market. As
people stay home, the entertainment market is making records.2
Trading multiples and economic outlook
Index: MSCI World Information Technology1 Forrester has revised its IT spending forecast downward and expects a 50%
Historical averages (EV/EBITDA) Coronavirus impact (EV/EBITDA) probability that global tech markets will decline by 2% or more in 2020 if a full-
-1.1x fledged recession hits.
25.8x 28.3x 28.0x
21.1x 26.9x Gartner expects global IT spending in 2020 to decline by +6%.
Software spending is the subsector expected to show the highest resilience, while
computer equipment and IT consulting and systems integration services spending
10y avg. 5y avg. 3y avg. Jan 1, 2020 Current is expected to show weaker growth.
Note: 1) MSCI World industry indices used (top 10 companies for sector indices), 01-01-2020 = index 100; 2) In EMEA and selected Asian countries, physical games sales are up by 63% according to
GamesIndustry.biz.
Source: S&P Capital IQ, Gartner Market Databook (April 2020 update), Forrester Research (March 2020)
Coronavirus Impact Monitor – 30 October 2020 Page 15 Deloitte Economics © 2020Consumer Energy & Financial Industrials Real Estate Public
Resources Services TMT Transport
Industry outlook: Transportation
The transport market is in recovery following the opening of several markets
Highlights from the industry (as of 25 September 2020)
130 Transport stocks indicate belief in the market’s recovery
120 − The rapid spread of COVID-19 has had a major impact on transport of global
112.5 goods, with ripple effects from the shortfall in demand for goods from China.
110 108.1
105.0 − The growth in stock prices since the low point in mid-March indicates an
100
expectation for a recovering demand, as global trade picks up after countries
90 have opened up, driving the recovery of physical retail.
80
70 Airlines struggling to take off
60 − The MSCI Transportation Index has more or less recovered (it is now above
Sep 19 Nov 19 Jan 20 Feb 20 Apr 20 Jun 20 Jul 20 Sep 20
pre-outbreak levels), which has been driven by the Railroads and Air Freight
MSCI World MSCI Transportation Danish Transportation Index and Logistics sub-industries, which hold a large weight in the index.
− This masks some of the other sub-industries’ fortunes, such as airlines, whose
Transportation indices have largely followed the total market in recovering from lows around stock prices are still well below pre-outbreak levels.
March this year, implying an increased need for goods transportation.
Trading multiples and economic outlook (as of 25 September 2020)
Danish listed transport companies1 The Shanghai Containerized Freight Index (SCFI) has risen by 39% since the
Historical averages Coronavirus impact2
(EV/FY1 EBITDA) (EV/FY1 EBITDA) beginning of the year, having picked up markedly over the last few months.
+0.6x 1600
1400
7,1x 7,4x 7,5x 7,4x 8,0x 1200
4,6x 1000
800
600
10y avg. 5y avg. 3y avg. Last close Trough Current
1 11 21 31 41 51 61 71 81
2019 2020
2019
Note: 1) A.P. Møller-Mærsk, D/S Norden, DFDS, DSV Panalpina, NTG, TORM, 2) Lowest YTD was 4.6x on 20 March 2020
Source: Capital IQ, Shanghai Shipping Exchange, Forbes, IHS Markit
Coronavirus Impact Monitor – 30 October 2020 Page 16 Deloitte Economics © 2020Consumer Energy & Financial Industrials Real Estate Public
Resources Services TMT Transport
Industry outlook: Public
Managing the society through the second wave
Highlights from the industry (as of 30 October 2020)
A timeline for COVID 19 government response
Reducing the severe impacts of the second wave
Pre-
Initial response Adapt Recover and thrive − The government’s focus is on containing the second wave of the outbreak, while
COVID 19 minimising the severe economic consequences.
A new norm in − The number of citizens tested has increased significantly and fewer people are
government
hospitalised.
flexibility is set
Level of flexibility
and speed in Reopening initiatives have been partially rolled back
government
− The second wave has imposed a need for new restrictions. Compared to the first
wave, restrictions are more targeted and experience-based, which keeps the
majority of businesses running.
∼4-6 months ∼8-10 months ∼12-18 months
TIME − Requirements for face masks in public transport and other public spaces as well
Act to promote safety and continuity as restrictions on freedom of assembly have been introduced.
• Ensure the safety of citizens
Adapt measures through experience − Pressure on government to help industries affected by the restrictions.
• Focus on essentials
• Gradual reopening
• Fast response to an unknown and Recover and emerge stronger Deficit on public finances
• Fast and specialised restriction
unprecedented situation
adaptations to changes in • Responsible total reopening of − The aid packages and other initiatives amount to a total value of more than 12
• Offer maximum flexibility infection rates society
billion DKK.
• Learning from experience • Long-term enhancements in the
public sector − Public EMU debt is expected to increase from 33% of GDP in 2019 to
• A new level of flexibility approximately 46% of GDP in 2020.
Economic outlook
Aid packages for certain industries and focus on mitigating impact of restrictions in the private sector through earlier start-up of planned investment and prepayment of suppliers are
expected to ease the negative impact on the economy. For instance, infrastructure investments in the municipalities have increased.
Aid packages and the economic setback will have an immediate negative impact on public finances and may challenge government spending in the long term.
After a budget surplus in 2019, the Ministry of Finance expects a deficit of 4.5% of GDP in 2020. In 2021, the economy is expected to grow by 3.6%. This is an slight downward adjustment
compared to the June 2020 outlook, primarily explained by restrictions imposed by the government relating to the second wave of infections.
Digitalisation in the public sector may be boosted, as the crisis has reinforced virtual ways of working.
Sources: Deloitte Insights, Government’s response to COVID-19. From pandemic crisis to a better future, April 2020, Ministry of Finance, August 2020, KL, Danmarks Nationalbank
Coronavirus Impact Monitor – 30 October 2020 Page 17 Deloitte Economics © 2020Industry outlook: Deloitte contacts
How Deloitte can help you
Consumer Energy & Resources
• Please use the contact details opposite to get in touch with our
Financial Advisory industry group leaders and find out how we can Mads Damborg Troels Ellemose Lorentzen
assist you. Partner Partner
• We are well-positioned to assist in a range of tasks, such as those
Email: madsdamborg@deloitte.dk Email: tlorentzen@deloitte.dk
below.
Mobile: +45 30 93 54 81 Mobile: +45 30 93 56 90
Focus areas Financial Services Life Science & Health Care
Björn Lagerstam Mads Damborg
State aid packages
Partner Partner
Email: blagerstam@Deloitte.dk Email: madsdamborg@deloitte.dk
Liquidity scenario analysis
Mobile: +45 30 93 48 30 Mobile: +45 30 93 54 81
Debt covenant advice and financing Government & Public Services TMT
Rikke Beckmann Danielsen Kasper Svold Maagaard
Business restructuring and M&A Partner Partner
Email: rdanielsen@deloitte.dk Email: kmaagaard@deloitte.dk
Bankable business plan development Mobile: +45 30 93 56 92 Mobile: +45 30 93 54 54
Stakeholder management and process control Industrials Real Estate
Niels Stoustrup Tinus Bang Christensen
Impact assessment Partner Partner
Email: nstoustrup@deloitte.dk Email: tbchristensen@deloitte.dk
Economic modelling and forecasting Mobile: +45 30 93 59 15 Mobile: +45 30 93 44 63
Coronavirus Impact Monitor – 30 October 2020 Page 18 Deloitte Economics © 2020Appendices
GDP Forecasts Page 20
Corporate sector expectations earning Page 21
Market volatility and European credit default probability Page 22
Deloitte Government Response Portal Page 23
Coronavirus Impact Monitor – 30 October 2020 Page 19 Deloitte Economics © 2020GDP forecasts
Danmarks Nationalbank forecasts a recession of -3.6% growth for 2020, with a return to previous
levels of GDP by 2022
• In its ”Outlook for The Danish Economy — September 2020”, Danmarks Nationalbank has stated that the drop in growth will be -3.6% lower than expected for the year,
with a rebound to 3.6% in 2021 and 2.3% in 2022.
• The OECD and the World Bank forecasts are still broadly consistent with those from the IMF in the sense that they paint a picture of a sharp downturn in 2020, followed by
a recovery in 2021. The contractions of the economy are primarily due to major drops in Q1 and partly in Q2 2020. Economic activity is expected to increase continuously
from Q3. The biggest question remains around further incidences of waves and shutdowns rippling through the world economy.
• A big risk is those countries which are reliant on tourism and travel-related business, as their recovery will be stalled until normal travel conditions can resume. Denmark
remains decently diversified in its economic industries and risks, enabling a relatively positive comparison in terms of depth of recession, but a more subdued growth
thereafter.
Eurozone: GDP growt h World: GDP growt h
8% 8%
6% 6%
5.2%
4% 4.9%
1.2% 4% 2.9%
2%
- 2%
(2%) -
(4%) (2%)
(6%)
(4%)
(8%)
(5.4%)
(10%) (9.8%) (6%)
(12%) (8%)
2015
2007
2015
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
2019
2020
2021
2005
2006
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
2019
2020
2021
Historical (IMF) Avg. forecast Historical (IMF) Avg. forecast
IMF OECD IMF OECD
World Bank World Bank
Note: Labels shown in the charts represent average forecast. GDP forecasts as of June 2020, with the exception of IMF’s forecast for Denmark which was made as of April 2020.
Source: IMF, OECD, World Bank
Coronavirus Impact Monitor – 30 October 2020 Page 20 Deloitte Economics © 2020Corporate sector earnings expectations
Corporate earnings expectations have been severely curtailed since the outbreak,
although analysts have become more optimistic
• The selloff in European equity markets, triggered by the Change in net income consensus estimates between
COVID-19 pandemic and the associated economic slowdown, 31 January 2020 and 28 October 20201
differs across sectors, see page 3.
• To shed light on the underlying drivers of this selloff across Energy
sectors, the chart opposite displays changes in expectations of
Consumer discretionary
stock analysts. In particular, the chart shows how stock
analysts have downgraded consensus expectations for net Financials
income across sectors and time:
Communications services
− The Energy sector has seen its net income estimates being
downgraded by 40%-70% in 2020-2021, likely due to sharp Industrials
declines in oil and gas prices.
Utilities
− Consumer Discretionary, Financials, and Communication
Services are also expected to be severely affected. Their net Materials
income estimates for 2020 are, on average, more than 20%
below pre-crisis estimates. Other consumer staples
− Transportation shows significant divergences in the Information Technology
underlying data, with airlines in particular showing heavy
expected losses in 2020, while other freight firms are Real estate
showing a strong improvement, and due to their weight in Health care
the index are pulling the sector into growth territory.
Food & staples retailing
− Only the Health Care and Food & Staples retailing sectors’
2020 expectations have improved. Transportation
• In general, analyst expectations are improving (or becoming
(70%) (60%) (50%) (40%) (30%) (20%) (10%) - 10% 20% 30%
less negative) compared with our last analysis in September
2020 2021 2022 2023
2020.
Note: 1) Based on analyst estimates for S&P Europe 350 Index constituent companies
Source: S&P Capital IQ
Coronavirus Impact Monitor – 30 October 2020 Page 21 Deloitte Economics © 2020Market volatility and European credit default probability
Equity market volatility remains elevated and comparable to the levels observed during the GFC
VSTOXX Index1
100
90
• The VSTOXX Index measures 30-day implied volatility of
80 81
the EURO STOXX 50 equity index and reflects investors' 74
Volatility index
70
uncertainty about future equity market moves.
60
• As shown, the coronavirus induced an increase in volatility to a
50
level comparable to that experienced during the GFC in 2008.
40 39
• Volatility fell back over the summer and through to September, 30
but has increased in the most recent weeks, as accelerating
20
COVID-19 case numbers weigh on financial markets.
10
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
iTraxx Europe Crossover index: Default probability2
%
• The chart opposite shows the development in the implied
70
default probabilities based on the 5Y iTraxx European 61.7%
Crossover spread of Credit Default Swaps and an assumed 60
50.2%
Default probability in %
recovery rate of 40%. It measures default probabilities on a
50
portfolio of sub-investment grade corporate debt in Europe. 43.3%
40
• The default probability has fallen significantly from the peak
reached in March 2020, and the current level (27%) is now 30
26.5%
once again in line with long-term levels.
20
• As the index reflects cost of debt, refinancing remains costlier
10
for leveraged companies compared to pre-outbreak, even
though interest rates are very low. 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Note: 1) VSTOXX as volatility index of EURO STOXX; 2) Default probability calculated based on 5Y iTraxx European Crossover CDS and a recovery rate of 40%
Source: Thomson Reuters Eikon
Coronavirus Impact Monitor – 30 October 2020 Page 22 Deloitte Economics © 2020Deloitte Government Response Portal
Database of financial, tax, business and social measures announced by governments globally
• To aid our clients in navigating the complex landscape of COVID-19 assistance programmes, we have developed a free digital portal that captures the latest financial, tax,
business and social measures enacted by country.
Access the portal!
Coronavirus Impact Monitor – 30 October 2020 Page 23 Deloitte Economics © 2020This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities. Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our global network of member firms and related entities in more than 150 countries and territories (collectively, the “Deloitte organization”) serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 330,000 people make an impact that matters at www.deloitte.com. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please seewww.deloitte.com/about to learn more. © 2020 Deloitte Statsautoriseret Revisionspartnerselskab. For information, contact Deloitte Global.
You can also read
