A COVID vaccine for saving the real estate sector

The race for a COVID-19 vaccine is engaged, and several companies are already in the Phase 3 of clinical trials with the Food and Drugs Administration. COVID was a “fortunate” event for several biotech companies which went from rags to riches in a matter of days. Beyond COVID vaccine’s impact on public health, there is a bigger picture, that could be potentially painted in more than 50 shades of grey. The pandemic is emptying slowly but surely the big metropoles, and the foreseeable impact on the big business centres could be devastating.  Vaccinating people against the “Chinese” coronavirus equals saving the real estate market from sudden death.

The upper classes are fleeing New York for Newark, Los Angeles for Muskogee, and London for Dagenham. And the move is not only temporary but definitive in most cases. The real estate prices and the rents in the big American cities are decreasing at a fast pace. The only thing going up is the rate of unpaid rents. Real estate is not the only damaged sector. The pandemic also zeroes out retail, catering, and entertainment.

Moreover, the real estate, both commercial and residential is financed by mortgages, and the lack of revenue leads ineluctably to foreclosure. Therefore, towards the end of the year, many banks may end up with considerable exposures to real estate in deserted cities. And 2008 will seem a tap on the shoulder compared to what might come. The central banks may not be able nor want to intervene.

Securing a viable vaccine before the winter is more than necessary.  It is the only way, real estate and implicitly the real economy can survive.

Ninety percent of all millionaires become so through owning real estate.
Andrew Carnegie, American businessman

Market overview

S&P 500, the leading index of the US stock market reached its historical peak this week. The VIX descended to a lower level fuelling the optimism. Is this the silence before the storm?

It could easily be because the market needed some stability after the March contraction. It found a strong momentum due to central banks’ money printing strategy. Seemingly the central banks played all their cards, and in the case of an unforeseen development, the impact could be harsh, and the big losers will most likely be the financial sector.

Focus:

HSBC

HSBC's share is at its lowest point, and this is a warning signal for the banking sector. In the midst of the pandemic, global banks should be in a better position to overcome the challenges of these hectic times, than a small regional bank. But, HSBC's case may be a cautionary tale.

The London-based bank had a massive cost structure, and a cost-cutting plan was in place before the pandemic outbreak. The “Chinese” virus delayed the restructuring project, and HSBC has difficulties on all fronts. Turmoil in its Hong Kong fief, fewer revenues from the traditional businesses and massive costs on its balance sheet are the factors impacting HSBC's share price. The life may seem full of optimism when admiring the view from the 40th floor of the HSBC tower in Canary Wharf, but the reality on the street is different.

COVID:

Curevac

Coronavirus killed more than 835 thousand people but opened several opportunities for many pharma companies.  Headquartered in Tubingen Germany, Curevac already found support from Bill and Melinda Gates Foundation.

Two weeks ago, the German company working on a vaccine against COVID was listed on NASDAQ. The vaccine is in phase I of clinical trials with the FDA. Shortly after its listing, Curevac signed a procurement agreement with the European Commission. If its remedy enters Phase III, Curevac share price could go through a rally.  

COVID:

Novovax find a second wind

Novavax's vaccine is only in Phase II of clinical trials with the FDA. But, several specialists place the Maryland-based company as a favourite to deliver the first vaccine in the US. The race for the vaccine is going to a boiling point, and there will be more than one winner, as governments will diversify their portfolio of solutions against COVID.  

For Novovax, the pandemic brought a second wind. Novavax's share reached a peak previously in 2015, after that event becoming almost a penny stock. Is premature to say how the whole plot will unfold, but in the short term, one can say that Wuhan boosted Novavax.

Market outlook

Markets ended the week into a rather optimistic state.  The Dow Jones found colours and went above 28,500, while NASDAQ continued to find support at 11,500. The S&P 500 reach its peak, but Dow Jones is not there yet. If the Dow Jones goes above 29,000, the geometry of the stock market may enter a new phase.

The Gold ounce is still below the resistance level of 2000 USD, but liquidity currently towards the stock market, thereby hindering Gold’s momentum.