The Islamic Development Bank Group, in cooperation with the United Nations Conference on Trade and Development, organized a webinar on the Impact of COVID-19 Pandemic on the Global Investment Outlook

The Islamic Development Bank (IsDB) Group hosted a webinar on the impact of the COVID-19 pandemic on the global investment outlook, which was organized in collaboration between the United Nations Conference on Trade and Development (UNCTAD) and the Country Strategy and Cooperation (CSC) Department, IsDB on 17th November 2020 to discuss the impact of COVID-19 on FDI and trade in OIC member countries.

The Islamic Development Bank Group, in cooperation with the United Nations Conference on Trade and Development, organized a webinar on the Impact of COVID-19 Pandemic on the Global Investment Outlook

 The main objective of the webinar is to present the key findings of the World Investment Report 2020 – International Production Beyond the Pandemic with a highlight on FDI trends in foreign direct investment (FDI) worldwide, at the regional and country levels and emerging measures to improve its contribution to development. In addition to presenting IsDB Group Strategy during COVID-19 and its impact on OIC Member Countries and Investment Promotion Agencies (IPAs).

The Webinar also proposed adopting policies and strategies to revive investment and trade in member states to advance investment promotion activities, in order to support the IsDB Group efforts to assist Investment Promotion Agencies (IPAs) in member countries by assisting them in devising appropriate investment and trade policy responses to the ongoing pandemic

Mr. Oussama Kaissi, CEO of the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), stated that “the COVID-19 pandemic has created a devastating global health crisis. According to UNCTAD’s 2020 World Investment Report, global flows of foreign direct investment (FDI) will be under acute pressure this year as a direct result of the pandemic. In order to combat these implications in member countries, IsDB and its group members have implemented a number of initiatives to maintain trade and investment flows. ICIEC will be an important part of the long-term recovery, supporting the growing demand for risk mitigation solutions”.

Mr. James Zhan, Director, Investment & Enterprise Division, UNCTAD, made a presentation which highlighted the key findings and policy recommendations found in its World Investment Report 2020: International Production Beyond the Pandemic.

Mr. Amadou Diallo, the Acting Director-General, Global Practices at the Islamic Development Bank in his speech stated that during COVID-19, the Bank provided technical assistance programs for the Islamic Development Bank Group such as RCI and ITAP to support the Member Countries by assisting them in developing suitable plans for investment and trade policy to confront the ongoing Corona pandemic. This is in the framework of a tripartite approach centered around the “response, recovery and rebuilding” pillars.

Mr. Mohammed Bukhari, Senior Investment Promotion & Regional Cooperation Specialist, CSC Dept., IsDB delivered a presentation on the impact of COVID-19 on MCs, particularly in foreign direct investment (FDI), domestic investment and investment promotion agencies (IPAs).

It is noteworthy that the private sector institutions of the Islamic Development Bank Group played an important role during COVID-19, as Mr. Asheque Moyeed, Division Head, Infrastructure & Corporate Finance,  the Islamic Corporation for the Development of the Private Sector (ICD) made a presentation which focused on the efforts related to promoting investment in member countries, where the IsDB Group private sector institutions pledged with IsDB to provide $ 700 million to stimulate investment, finance trade, investment insurance and export credit in member countries. Two D-8 Egypt and Turkey are going to utilize around $270 million of this package.

The webinar brought together over 500+ participants from 113 countries, including government officials, Presidents & CEOs of local/international private sector companies, multilateral and financial institutions, individual investors, entrepreneurs, chambers of commerce & Industry, business associations, and investment promotion agencies

Biden will deliver a boost to stock markets and economy

President-elect Joe Biden will deliver a boost to global stock markets and the U.S. and world economy, affirms the CEO of one of the world’s largest independent financial advisory organizations.

The observation from Nigel Green, chief executive and founder of deVere Group, comes as the Democrat candidate won the race to become the next U.S. president, defeating Donald Trump following a nail-biting vote count after Tuesday’s election.

Biden won more than 73 million votes, the most ever for a U.S. presidential candidate.

Mr Green says: “President-elect Joe Biden will deliver a boost to global stock markets and the U.S. and world economy.

“Although a Biden win was pretty much priced-in by the markets, his victory will eliminate uncertainty – which they loathe – and they will rally further as a result.

“Even possible legal challenges from Trump will be dismissed by investors who will instead be focusing on the renewed certainty and stability that a Biden White House will bring, including in key areas such as trade tensions with China, keeping the U.S. in the World Health Organization, resigning the Paris climate agreement, and abiding by other international agreements and long-standing international allies.”

He continues: “Biden will need to work with the Republican-led Senate to secure fiscal stimulus to bolster the economy.  He might struggle to get the $3trn wanted by Democrats, but some package is likely. 

“This will buoy the markets and would have investors think about a broader-based economic recovery – rather than a narrower, tech-heavy one.

“As the world’s largest economy, sustainable, long-term growth in the U.S. will have a positive ripple effect for the world economy.”

The reduced chance of massive fiscal stimulus will also mount pressure on the Federal Reserve “to inject further liquidity,” he notes.

In addition, the Biden win without full Senate support means less risk of regulation and higher corporate and personal taxes, which will give more oxygen to the markets and economy.

Mr Green adds: “In general terms, sectors to benefit from the Biden administration’s agenda include renewable energy, industrials and infrastructure, and small caps.”

The deVere CEO concludes with a warning: “Biden will need not only to work with the Senate but to heal a divided country.

“The world is looking at America, it needs to lead the world economy in a positive, forward-thinking and smartly way – and at pace.

“If it doesn’t, we can expect American economic dominance to ultimately be replaced by an emerging and fast-growing Asia.” 

Global foreign direct investment falls 49%, outlook remains negative

UNCTAD

The biggest drops occurred in developed countries, cutting across all major forms of foreign direct investment.

Global foreign direct investment (FDI) flows fell 49% in the first half of 2020 compared to 2019, due to the economic fallout from COVID-19, reveals UNCTAD’s latest Global Investment Trends Monitor released on 27 October.

In the wake of the pandemic, lockdowns around the world slowed existing investment projects and the prospects of a deep recession led multinational enterprises to reassess new projects.

“The FDI decline is more drastic than we expected, particularly in developed economies. Developing economies weathered the storm relatively better for the first half of the year,” said James Zhan, UNCTAD’s investment and enterprise director. “The outlook remains highly uncertain.”

Developed economies suffer steepest fall

According to the report, developed economies saw the biggest fall, with FDI reaching an estimated $98 billion in the six-month period – a decline of 75% compared to 2019.

The trend was exacerbated by sharply negative inflows in European economies, mainly in the Netherlands and Switzerland. FDI flows to North America fell by 56% to $68 billion.

Meanwhile, the 16% decrease in FDI flows to developing economies was less than expected, due mainly to resilient investment in China. Flows decreased by just 12% in Asia but were 28% lower than in 2019 in Africa and 25% lower in Latin America and the Caribbean.

In the six months to June 2020, developing countries in Asia accounted for more than half of global FDI. Flows to economies in transition were down 81% due to a strong decline in the Russian Federation.

The decline cut across all major forms of FDI, the report shows.

The report shows that cross-border M&A values reached $319 billion in the first three quarters of 2020. The 21% decline in developed countries, which account for about 80% of global transactions, was checked by the continuation of M&A activity in digital industries.

The value of greenfield investment project announcements – an indicator of future FDI trends – was $358 billion in the first eight months of 2020. Developing economies saw a much bigger fall (-49%) than developed economies (-17%), reflecting their more limited capacity to roll out economic support packages.

The number of announced cross-border project finance deals declined by 25%, with the biggest drops in the third quarter of 2020, suggesting that the slide is still accelerating.

Figure 1: Global investment thermometers, 2020 Q1-Q3
Figure 1: Global investment thermometers, 2020 Q1-Q3
(Percent change vs 2019)
Source: UNCTAD
*The trend in greenfield projects refers to the first eight months of 2020.
**International project finance refers to (the trend in) the number of deals, as project values for the latest months are unavailable.
FDI inflows by region, 2020 H1 vs 2019 6-month average
Figure 2: FDI inflows by region, 2020 H1 vs 2019 6-month average
(Billions of US dollars and percent)
Source: UNCTAD

Outlook for full year remains negative

Prospects for the full year remain in line with UNCTAD’s earlier projections of a 30% to 40% decrease in FDI flows, the report indicates.

The rate of decline in developed economies is likely to flatten as some investment activity appeared to be picking up in the third quarter.

Flows to developing economies are expected to stabilize, with east Asia showing signs of an impending recovery.

The flows will hinge on the duration of the health crisis and the effectiveness of policy interventions to mitigate the economic effects of the pandemic. Geopolitical risks continue to add to the uncertainty.

Despite the 2020 drop, FDI remains the most important source of external finance for developing countries, according to UNCTAD. Global FDI stock stood at $37 trillion at the end of 2019.

More stimulus is welcomed – but what’s needed is smarter stimulus

Stock markets are cautiously upbeat that a stimulus package can be agreed in the U.S. before the November 3 election – but even if it does happen, it’s likely to be a “short-lived sticking plaster” that masks the major long-term issue: unemployment.

This is the warning from Nigel Green, CEO and founder of deVere Group, one of the world’s largest independent financial advisory and fintech organizations. 

It comes as House Speaker Nancy Pelosi and Secretary Steven Mnuchin spoke again on Tuesday – the deadline imposed by the Speaker – as the two sides try and strike a deal over another significant fiscal stimulus package ahead of the election.

Earlier this month, Republican senators slammed a $1.8 trillion offer made by the Trump administration to the Democrats as too big, an offer Ms Pelosi dismissed as “insufficient.”

Discussions are due to continue on Wednesday upon the Secretary’s return to Washington.

Nigel Green warns: “No doubt, a breakthrough of the deadlock that would allow for more stimulus would provide a lifeline to millions and millions of Americans.

“U.S. and global markets are, generally, cautiously optimistic that a deal can be agreed by the two sides.

“There’s a sentiment that something will have to materialize – and this is fueling markets.

“However, the window of opportunity is closing and it is not yet a done deal.  

“If talks collapse, the markets will inevitably be disappointed and there’s likely to be a short-lived sell-off.”

He continues: “Even if Pelosi and Mnuchin can get another massive stimulus package agreed, and U.S. and global markets rise, this is likely to serve only as a sticking plaster.

“A market rally is going to be difficult to be sustained due to the enormous uncertainty created by other factors including the presidential election, a possible looming constitutional crisis in the world’s largest economy, and the growing Covid-19 infections in America and other major economies.”

The deVere CEO goes on to add: “Getting over the political impasse would help boost the economy and deliver much-needed money to Americans, but the major, lasting issue triggered by the pandemic remains: mass unemployment, which will hit demand, growth and investment.

“As such, a swift rebound for the U.S. economy is doubtful as unemployment claims continue to rise.  

“That V-shaped recovery talked about by so many? That will be impossible with so many millions facing long-term unemployment.” 

Whilst it is certainly positive that unemployment has fallen from 15% in the U.S. to 11% in recent weeks, it should be remembered that this is still at the same rate of the 2008 crash. 

In addition, a second wave of soaring unemployment could hit imminently as some support measures wind-down and business’ and households’ savings and resources have been already run-down.

Mr Green concludes: “Near-term support for sure, but a long-term strategy – a multi-year vision – for growth and investment is essential.

“What’s needed is not just more stimulus, but smarter stimulus.”

Why Biden or Trump must urgently secure stable relations with China

Joe Biden or Donald Trump – whoever is the President of the United States come November, their ultimate challenge is to secure “stable relations” with China which would win an all-out trade war, warns the CEO of one of the world’s largest independent financial advisory and fintech organisations.

The warning from Nigel Green, chief executive and founder of deVere Group, comes as Mr Biden prepares to give his official acceptance speech on Thursday night to the Democratic National Convention to become the party’s nominee to run against Mr Trump on November 3.

Mr Green says: “Managing China and maintaining America’s fragile economic superiority over its major trade and commerce rival will be the defining foreign policy issue of this presidential election.

“Both the Democratic and the Republican candidates seemingly share a belief that ‘being tough’ on China — or whoever can knock China the most effectively– is going to do well with the electorate.

“Both Biden and Trump will up the China-bashing between now and November 3.”

He continues: “Whilst this strategy might be a political weapon to win the White House, whoever does become the next CEO of the world’s largest economy will have a golden opportunity to secure stable, normalised relations with China.

“And this should be high-up on their agenda.

“Cooperation will benefit both nations by helping to boost global economic growth, encourage investment, secure jobs, keep prices down for consumers, reduce unfair or illegal economic, commercial and technological practices, reduce poverty and environmental problems, and contribute to stopping human-rights abuses and military interventions.”

But there is another major reason, says the deVere CEO, why moving towards amicable relations with China cannot go unmet by the incumbent or the challenger.

“A de-escalation in U.S.-China tensions must be a top priority for whoever is in the Oval Office because it can be very reasonably assumed that China will win an all-out trade war.

“Why? Because America’s trade deficit with China is frequently over-estimated and barely gives it the upper hand.

“Also, China’s central bank — unlike the U.S. Federal Reserve — is not independent and can be made to cut interest rates to bolster domestic demand and devalue the currency to make Chinese exports even more competitive.

“In addition, China is better positioned than America – which has a record budget deficit – to help out industries hit hard by a trade war. 

“Plus, the ruling Communist Party of China can take the political impact of a trade war better than whichever party wins in the U.S. 

“The leaders of China don’t need to play popularity games.”

Mr Green concludes: “Whoever wins the U.S. presidential election must seize the momentum that a win gives a political leader and immediately seek amiable relations with the world’s second-largest economy.”

Investors buoyed by extra U.S. stimulus to support recovery

Investors who have been “paying attention” have been topping–up their investment portfolios and will continue to do so, says the CEO of one of the world’s largest independent financial advisory and fintech organisations.

The comments from Nigel Green, the chief executive and founder of deVere Group, which has $12bn under advisement, come as stock markets around the world further rallied on Tuesday after the U.S. Federal Reserve announced an expansion to its historic stimulus programme.

Mr Green affirms: “Global stocks have been buoyed by the news from the Fed – the world’s de facto central bank – to buy individual corporate bonds in addition to the exchange-traded funds it is already purchasing, to support the world’s largest economy.

“This extra stimulus acts as a ‘backstop’ or ‘floor’ for equities. 

“The additional Fed support was widely expected by the markets and therefore, investors who have been paying attention have been topping-up their investment portfolios recently as entry points will inevitably continue to go higher as we move forward.”

He continues: “It is likely that savvy investors will continue to enhance portfolios as the backing is likely to be maintained for years, not quarters.

“Also, it has been reported that President Donald Trump’s administration is preparing to unveil a $1 trillion infrastructure package. This will further boost asset prices.”

The deVere boss called the additional measures last week. 

He noted on Thursday June 11: “Further stimulus can be expected from the Fed – and also perhaps from Congress too – in the near future… This will support and likely boost asset prices moving forward. Investors will now be eyeing the opportunities before any fresh or enhanced stimulus packages are announced.”

London’s FTSE 100 and Frankfurt’s Dax both jumped 2.2% in morning trading on Tuesday, the pan-European Euro Stoxx 600 gained 2%. U.S. futures markets suggested that U.S. stocks would rise further when trading begins on Wall Street, with S&P 500 futures up 1%.

In Asia-Pacific, Tokyo’s Topix shot up 4% and Australia’s S&P/ASX 200 gained 3.9%. Meanwhile, Hong Kong’s Hang Seng rose 2.4% while China’s CSI 300 index was 1.5% higher.

Nigel Green concludes: “Few things can fuel markets like another stimulus injection.

“The message investors are taking away is that the U.S. central bank and government are prepared to do whatever it takes to support the recovery.”

No-deal Brexit fears trigger investors to seek international options

Growing fears of a no-deal Brexit will prompt an increasing number of British and international investors to move their financial assets overseas out of the UK, believes the CEO of one of the world’s largest independent financial advisory and fintech organisations.
 
The observation from Nigel Green, founder and chief executive of deVere Group, which has $12bn under advisement, comes as the UK formally rejects an extension to the Brexit transition period – raising the risk of a no-deal departure at the end of the year.
 
Mr Green notes: “Due to the Covid-19 pandemic, the UK is suffering its deepest recession in 300 years. Nevertheless, the government is sticking with its hard Brexit plans.

“Concerns over the fallout from a no-deal Brexit will prompt an increasing number of British and international investors to move their financial assets overseas out of the UK.”

He continues: “Should the UK leave with no-deal, the already weak pound – which is one of the world’s worst-performing currencies this year – is likely to remain weak for several years to come until Britain and the EU readjust. It has already shed about 20% of its value since the EU referendum in 2016.

“A low pound can help to reduce people’s purchasing power and lead to a drop in UK living standards. Weaker sterling means imports are more expensive, with rising costs being passed on to consumers.”

The drop in sterling is good for UK exports some insist, however around half of the country’s exports rely on imported components. “These will become more expensive as the pound falls in value,” noted Mr Green.

“In addition, a weaker pound is, of course, bad news for British expats, amongst others, who receive income or pensions in sterling and as Brits looking to travel overseas,” he added.
 
The deVere CEO goes on to say: “Britain appears to be sleepwalking towards an economic blackhole.
 
“People are already becoming increasingly nervous about this situation.  Many will, inevitably and quite sensibly be looking to build and protect their wealth by moving assets overseas through various established international financial solutions.
 
“The pace of this trend is likely to increase over the next few months as the issues look set to ramp-up.”

Expert comment from Warwick Business School

Warwick Business School

Commenting as Easyjet announced it would resume flights next month,

Professor Loizos Heracleous, an aviation industry expert at Warwick Business School, said:

“Airlines will face a number of challenges as they resume flights. For example, if governments require them to observe social distancing rules on planes, that would mean middle seats are left empty.

“This would reduce capacity and lead to an increase in ticket prices. According to the International Air Transport Association (IATA), prices would have to rise by 40-50 per cent, just for airlines to break even.

“The good news for airlines is that they will benefit from lower oil prices and research is already under way that may enable equipment to sniff out coronavirus before passengers board.

“Airlines have been forced to conserve cash to survive, cutting flights, reducing their workforce, and postponing capital investment. However, social habits including the urge to travel have not changed. Provided we find ways to control the virus, through testing, treatment or a vaccine, the industry should be back to pre-pandemic levels within two to three years.

“Aviation is too essential to wither. It is here to stay and the market system is resilient enough to ensure the industry thrives after this temporary setback.”

Pound could drop even further – to $1.18 – in June: deVere CEO

The pound – this month’s worst-performing major currency – could “easily drop to $1.18” at the end of June, warns the CEO of one of the world’s largest independent financial advisory and fintech organisations.

The warnings from deVere Group’s chief executive and founder Nigel Green come as it is revealed that the British currency shed almost 4% against the U.S. dollar in May and 3% against the euro.

Mr Green comments: “The pound is this year’s third-weakest major currency – just behind the New Zealand dollar and Norwegian krone, which have done even worse.

“The pound has been battered since the Brexit referendum in 2016 and the ensuing years of political uncertainty, losing around 20% of its value since the referendum. 

“The Covid-19 crisis has been another hammer blow for sterling as it promoted a flight-to-safety and ramped-up the search for liquidity.  This situation is a win for the U.S. dollar and, in turn, a loss for the pound.”

He continues: “There are legitimate concerns that the pound has further to fall in the next few weeks.

“It could easily drop to $1.17-$1.18 by the end of June due to renewed and heightened fears of a negative shock due to a no-deal Brexit combined with the far-reaching economic fallout of the pandemic.”

Negotiations between the UK and the EU on their post-Brexit future relationship stalled on Friday with the EU’s chief negotiator Michel Barnier saying the two sides risked reaching a “stalemate.”

The British Prime Minister Boris Johnson has repeatedly threatened to walk away from the talks if insufficient progress has been made by next month’s high-level negotiations. The UK has indicated the alternative of an “Australia-style” deal, a relationship where both sides trade on basic World Trade Organization terms, similar to a no-deal Brexit.

“An even weaker pound will help to reduce people’s purchasing power and a drop in UK living standards. Weaker sterling means imports are more expensive, with rising costs being passed on to consumers,” says Mr Green.
 
“The fall in the pound is good for exports some claim, but it must be remembered that around 50% of UK exports rely on imported components. These will become more expensive as the pound falls in value.
 
“A low pound is, of course, bad news for British expats, amongst others, who receive income or pensions in sterling.
 
“The country’s financial services sector – which represents 6% of all economic activity – will also be adversely affected because it is built on foreign investment that puts its faith in sterling being strong.”

The deVere CEO concludes: “The pound will remain volatile, and is likely to become weaker in the next month.
 
“As such, it can be expected that domestic and international investors in UK assets will be seeking the available international options available to them.”

Negative interest rates are coming, investors taking action: deVere CEO

Negative interest rates are coming and investors will now be looking to bolster their portfolios to ‘get ahead of the curve and build wealth’, says the CEO and founder of one of the world’s largest independent financial advisory organisations.

deVere Group’s Nigel Green is speaking out after rate options, which gauge monetary policy forecasts, implied on Monday a 23% likelihood that the key federal funds rate will drop below zero by the end of 2020, according to BofA Securities data.

It’s not just the U.S., the world’s largest economy, which is moving towards this scenario.

On Tuesday, the Deputy Governor of the Bank of England also suggested that the UK may be headed toward negative interest rates.

Mr Green comments: “A new global era of negative interest rates would have been unimaginable even a few months ago.  But this has now changed due to the coronavirus.

“As central banks around the world grapple to control the economic impact, it can be reasonably expected that more and more of them will take a dramatic change of policy course and take rates to below zero – like their peers in Europe and Japan.”

He continues: “There is legitimate debate about the efficacy of negative interest rates on boosting economies. 

“They could turn out to be a masterclass in the law of unintended consequences as they could be viewed by consumers and investors that the underlying economies are in a perilous position and, as a result, prompt a drop in consumer and investor demand.”

Whilst the debate on whether negative interest rates help the ‘real economy’ or not will continue, there is no doubt that they help boost financial asset prices.
 
“With this firmly in their minds, market-wise investors will know be looking to bolster their portfolios before the next round of cuts and the likely subsequent price increase. They are taking advantage of the lower entry points now before the next major rally,” notes Nigel Green.
 
He goes on to add: “In addition, those with savings in the bank are already getting no return thanks to the ultra-low interest rates.  Negative rates will offer them more reason to increase their exposure to equities, for example.”
 
The deVere CEO concludes: “The question mark remains on whether cutting rates from their already low levels will solve the issues created by the coronavirus outbreak.
 
“I believe, due to the economic situation and the hints from central banks, that there are more rate cuts on their way as they know it’s not sustainable to just keep printing money.

“This ‘direction of travel’ will push up financial asset prices and, as such, many investors are now looking to get ahead of the curve and build wealth.”