First and foremost, we urge you to make you, your family and your friends’ health your most important priority. Even though, if we get the Corona virus it is likely that we will recover without incident, the virus is contagious and spreads fast enough that the prospect of a bottleneck in the healthcare system requires all of us to be vigilant, careful and follow government mandated measures including closures and social distancing.
We believe that it could be instructive to look at China’s experience with the Corona virus to see if and when there may be light at the end of the tunnel – when might we begin to see some positive news.
Deer Isle has done business in China for years and we have a strong network there. The observations as outlined below come from colleagues and business partners in China, Chinese investment bank research and the Chinese media. A quick reminder: the first lockdown in Wuhan took place on January 23rd – so we are now approximately 1.5 months later.
Life is Returning to Normal
- Residents in most cities including Shanghai, Beijing, Shenzhen and Hong Kong are free to go outside and move freely. Wuhan, while the situation is improving, continues to have restrictions.
- Shanghai City Park had visitors of 390,000 people on March 14th and March 15th.
- Shanghai expects all 335 parks to be open by March 20.
- 38 museums, art galleries, 22 libraries and cultural centers and 48 A-level scenic spots opened over the weekend (March 14 and March 15) in Shanghai.
- Shenzhen City Parks had 392,000 visitors on March 14th and March 15th.
- 40% of China’s scenic zones have reopened.
- Infectious cases originating in China have slowed to few (mostly concentrated in Wuhan). Now. China’s challenge will be to keep the international spread of the virus from re-infecting its population.
- 16 new cases were reported in China on March 15 with total reported cases of 80,860.
- Only 4 new cases were endemic to China and occurring in Wuhan – 12 were “imported”.
- Mandatory 14 day quarantines for all persons entering China to prevent reinfection.
- The temporary hospitals set up in Wuhan have been closed and the extra doctors are returning to their home towns – this is confirmed by people we know on the ground.
- Almost half of Chinese provinces have reached 100% clearance and are not reporting new cases.
- China’s schools are starting to re-open after being closed for 1 month.
- Some Chinese cities and retailers are giving “consumption vouchers” to local residents in order to encourage dining in restaurants and spending in local retail establishments to boost demand.
Business is Resuming, But Still Early Days
- In the last week of February, bookings for domestic flights departing in June surged by 250% compared to the previous week demonstrating that people are beginning to feel comfortable traveling again.
- Urban travel intensity across the country is estimated to be approximately 90% (estimated by using highway exit flow data) of the same period last year. Wuhan is still 20% of the same period last year.
- February 10th to 16th was the first week of work resumption and work rate was 48% of capacity.
- March 2nd to March 8th was the fourth week of work resumption and the nominal work resumption rate was 84% and capacity resumption rate was 77%.
- Current figures for March 13th are not yet known but are expected to be close to normal.
- Capacity under-utilization seems to have moved from lockdowns to lack of consumption (globally).
- Average daily coal consumption is rising daily and compared with an average of the past 3 years is 80.6%. It was 534,000 daily tons on March 13th.
- While sales of commercial housing, land, automobile are about 50% of the same period last year, average daily real estate sales volume of the 30 large and medium cities has increased from 280,000 square meters (which is a bit more than 50% of the same period average over the last 3 years) for week ended March 8th to 316,000 square meters for week ended March 13th (which is 66% of the same period average over the last 3 years).
- An estimated 85% of retail fashion stores closed during the epidemic; now, over 90% have now reopened. Traffic flow and sales are currently only 30 to 40% of pre-epidemic, but are expected to continue to increase. On-line sales seem to be replacing off-line sales especially as retailers transfer focus to on-line communities and techniques.
We do not know if the US trajectory will be the same as China’s. China has some tools that the US does not have and, the US has some tools that China does not have.
We know that the economic impact of the outbreak will be finite and that there will be investment opportunities. As the effect of the virus reduces, we expect that paradigms will shift and more work will be done virtually. Deer Isle’s proprietary Beacon technology is uniquely positioned to support capital raising and the identification of investment opportunities efficiently using technology and cloud based tools.
The Deer Isle proprietary Beacon technology enables capital seekers to virtually turbo charge their own capital raise efficiently and effectively on a turnkey basis by reaching a curated set of over 10,000 US institutional investors. It uses online technology to reach and give feedback on potential capital providers. In addition, on an unbundled basis, we offer consulting and closing advisory to help ensure closing success.
Please feel free to contact us if you would like to discuss China or our ability to help during this period. We look forward to hearing from you.
Deer Isle Group LLC
Deer Isle Capital LLC
Deer Isle Financial LLC
2 West 46th Street, Suite 402
New York, NY 10036