Due to the pandemic of Corona Virus [COVID-19] coming in the way of our lives and affecting businesses globally, the world had come to a halt. There have been predictions by The World Trade Organisation (WTO) that the impact on the global economy by the coronavirus pandemic could be far worse than that of the financial crisis hit in 2008-09. Market analyst, Ms. Reem Aboul Hosn, has clarified questions everyone wants answered, including how long will it take for the world to financially recover.
Ms Reem Aboul Hosn is Market Analyst and Presenter at Credit Financier Invest – International. The award-winning global investment and trading firm, is currently strengthening relationships with key business and finance journalists who are keen to get expert opinion and insight into current financial market news
How has the financial situation for businesses been during this current situation?
When we talk about the financial situation of businesses, I’d rather start with big businesses at the moment and how the Corona Virus affected those businesses. Let’s say the world’s economy revolved around $2.7 trillion at the start of this pandemic for the past month and a half or two months ago and then the usual increase in the GDP and the economic growth has also lowered overall in $300 billion. Plus as you can also see in other sectors, they have had big losses during this era. We’re talking about the technology sector, we’re talking about the import and export sector, we’re talking about the airlines and the Aviation sector as a whole. Also of course, I mean everything that has to do with the tourism sector has lost a lot in this pandemic. So, at the moment in this financial situation this is the outlook. Maybe later we can show more positiveness, but if you look at the figures even this market has lost almost $6 trillion. This is the current situation. The US thinks they have got to the peak but we don’t know that yet.
Do you predict any improvement financially around the globe, especially in the Middle East?
We cannot say about that moment about a prediction of any improvement in the financial situation. I think the question is when will this grown pandemic end? That’s the bigger question. I see this could end in either a short term or long term. We have two scenarios, firstly if Corona ends in the short term, this means there has been a good way to combat the virus, we can consider the world has done a great job in finding a cure and finding good equipment and everything to combat to finish this in the short term. Another advantage if we finish this in the short term is that the World Health Organisation and all the effort that have been done by G-20 as they are big in Saudi Arabia and have provided $5 trillion to small businesses if I am not mistaken, the IMF, from all around. This means it was a success if Corona ended in the short term. Another advantage I would take is that we could start seeing the economy coming back up if people respect the social distancing as well as gradually opening up the economy, this way we would see some gradual economic recovery. One more advantage I believe is, as we can see at the moment while I thank Corona as it has built a nice community out there with the world right now holding hands together whether it’s the Middle East or the global market economically and socially to combat this virus. These are the advantages I believe in the short run. While [the second scenario] in the long run, in the case of 6 to 1 year then we would see a lot of industries closing down, a lot of people loosing their jobs, maybe the unemployment rate would increase, and maybe the IMF and other healthcare organisations would have to do a lot and put more effort. Especially in Europe we would have to see a lot more efforts as well. At the moment we are still unclear as to when it will end, so we have to keep in mind the long term.
How do you feel Corona or COVID-19 has become a reason for the financial dip? Like, what about Corona has lead to the financial issue?
To be honest, as we are in this situation we can compare this to the financial crisis. There are some aspects that distinguish COVID-19 to the financial crisis. Just a quick brief about the numbers I have here, let me tell you something, looking at the financial crisis that happened in 2008, people who had gone unemployed were about 20 billion. Now because of Corona they are coming up to 25 billion. The comparison here shows that Corona can be even worse than the financial crisis. Another thing we need to talk about is the job market and this is why we can compare COVID to the recession. We see the challenge of working from home and all this new era. But the health sector is overwhelmed with finding a cure for COVID, so they don’t have time for other resources to combat other sicknesses around the world because at the moment everyone is talking about this in the healthcare sector. Another thing we can also add to compare to the financial crisis is basically it affects the economic downturn here when we are talking about the closure of non-essential businesses that kept them from doing activities from going out, communicating, from recreation, from socialising, this all in a normal financial crisis you can still do but at the moment because there is this pandemic, you cannot even go out as you have to respect the impact of this to society.
What advice do you have for businesses who aren’t doing too well or in general, how can they tackle the issue or how can they at least try to survive as much as possible?
To be frank there are some businesses that won’t make it through. Especially those ones who have physical stores, they don’t have the risk management as this is not something that is usual, of what we are going through at the moment. I think the businesses that could not make it would not have made it anyway in the long run. They don’t have an emergency plan set in there. I believe when you hit rock bottom, you have to do something and you have to change something. Some businesses are resistant to this change and they refuse to admit. This is why we can see some failures in there. However, this is what happens to weaker businesses, but if we maintain certain policies, such as keeping the workforce and maintaining the payroll, we either slow the business down but we make a plan for the long run health of the company and calculate our damages. I think this would be a better solution, and maybe later I will also capitalise on how a business such as CFI [Credit Financier Invest – International] survived this right from the start.
Looking at the stock exchange, can you give more detail about how the stock market and the financial instability is when it comes to the recovery phase after Corona and after the impact being hit keeping in mind when it comes to the recovery mode, how do you feel businesses are going to cover then?
Absolutely, for these businesses to recover because at the end of the day the balance would have been done even if it were a short or a long term. So should be some measures in there to try and combat this. As we can see at the moment, with the government spending, we are seeing some tax cuts, we are seeing some infrastructure stimulus, so these are measures in there for when Corona ends and how we will pick up from there. If these measures are set in place at the moment, we might see a better and faster recovery, as I mentioned earlier. But also I can say that there is a plan that is of 4 points, in which if we succeed combating Corona, this means that the whole financial and the whole dropping in interest rates will be gone ensuring we have succeeded and slowly businesses will pick up. It’s not going to be a fast recovery and it may go up to a year and could take more. But slowly businesses will recovery as they will see the whole induction in pro-government and this gather around the world for one reason would be a success. Of course, we should also look at small and medium businesses as these are the most affected at the moment.
If you could simply mention one of the biggest problem and it’s solution. What would that be in your perspective?
– We are not too sure on how to deal with this situation.
Solutions to those problems:
– People should stop panicking. respect the government and businesses to ensure recovery.
Looking at the current market in the globe, specifically the Middle East, what are some of the best performing markets? Because very few niche markets are actually doing pretty well during this time. Therefore, what do you feel are those markets in the current situation?
We talk more about companies that are doing good such as companies doing online businesses, such as Amazon. I really think that online at the moment I kind of picking up. Not only the online businesses but also the healthcare because everyone is looking for a cure at the moment. We can see big names and big players in the medical sector that are picking up. These are the main two sectors, although if you want to talk about the US market in general, before I move on to the Middle East, in the past few weeks starting April, we expected a pick up in the market especially after Trump announced $2 trillion release plan to the economy and also he had this discussion about opening up the economy again, which at first had a lot of resistance but then people, including big businesses, are now willing to adapt to this because at the end of the day people might think he might not be taking the right decision, but you can’t keep businesses from not working for so long. Something should be done, probably opening smoothly and combating this pandemic. But just to stop one and just open another is not going to work. This is the reason why the US market picks up in the past week, a few large businesses picked up an increase by 7%. But still we see that Wall Street almost dropped near what they had in the financial crisis. However, in the Middle East we saw a pick up in the Abu Dhabi and the Dubai market recently, and you know there is an article by the IMF that there will be an improvement in the economy starting 2021. Almost growth of 6% from what we are now. This is anticipated to be positive. Recovery in all aspects would help the stock market in the GCC region.
In this situation, do company valuations get affected? And if so, have they left an impact on the startup culture?
It definitely has impacted companies, especially right now when we have come to the announcement of the first quarter of this year. When companies announced their profits and their operations, they have already noticed a decline. This has been to the point that companies have started to issue their financial issues and seen drops. However, in the case of startups they should have a long breath in there because they can’t pick up and it will take a bit more time. But, taking the fact of measure that firing of people or stopping a business, taking such decisions at the moment you will regret them later. I would literally advise all businesses to be patient and have a good strategy because at the end of the day this is all going to end. Like you know when we think of financial crisis we don’t know when it is going to end, but what we are facing at the moment it is something that we know is going to end when we find the cure. It might be in 6 months, it might be in a year, or more, I don’t know when. But this is going to end. People are already putting emergency measures to pick up the economy, so small businesses need to tailor something that is needed. That’s because when businesses close, other businesses open. So, they need to capitalise what is needed at the moment and then later they can pick up but they need to be patient.
How is the gold market looking right now?
You know the gold market, everyone would rush to buy gold when we have uncertainty, political uncertainty, when we have the economy crashing. However, at the start of Corona we saw gold prices dropping, although that wasn’t a surprise to investors or the market. The reason being that people started believed more in currency and started piling up on dollars rather than believing in gold. But now at the moment after two moments, we have now seen a pick up in the gold prices. People are a bit more positive and believe to find the cure for the Corona Virus and this intention to open up the economy. That’s because after all if the US started then we everyone else will follow, let’s not deny that. If the US economy started opening up slowly other countries would start to take measures. This is why we see a drop in the gold prices because people are putting their money back in to stock. They are investing more in those uncertain products that bring them hirer returns, but still an all time gold is still considered a safe haven and is sold off in times of optimism, that is the ultimate thing. If Corona or COVID-19 kept on rising we might see a rise in the dip. If we start to see a few recoveries and cure, then it is definitely cheerful for the rise in the gold market.
What measures do you feel should be taken for the economy to sustain itself when it comes to asset management and equity? Especially for many businesses, how are peoples equities affected? and how does it affect companies managing their assets?
There are measures that need to be taken, especially now with unemployment on the rise. There should be a serious plan for when we talk about opening up the economy. For a best scenario, which we are nowhere near close to it. Economy wise, people are loosing their jobs, people are not spending a lot money, this reduces the income and subsequently we see the local governments and their setting back while looking to give out cash, this creates a cycle which does affect asset management and equity. But, I think if we can still see the central banks reducing their rates in the near future, and open up to try and boost investors at a time and try to generate a bounce back, then we can see the government and health organisations, such as IMF and other joining forces not only economically but academically. These are drastic steps that are challenging steps for those asset management and equity situations. However, we are seeing a lot of input from different sources, we just need to be patient and try to manage the situation.
Is there anything you would like to add?
Yes, one thing I would like to mention on how my company [Credit Financier Invest – International] was affected in particular. To be honest, once this started [COVID-19], the company had very early ways to combat the virus and there were a lot of measures technically and from a managerial perspective .this reflects the long history and professionalism of the company. So, apparently a t the moment we succeeded in several sections, when it comes to employees, when it comes to investors, and when it comes to competitors. There were alternatives and everything was communicated including the initiation of this pandemic, to be honest. Since then we shifted our focus to online businesses at the moment, because everyone is rushing towards online businesses since you are home anyway and you can easily access so many things, so we really put a focus on it and we kept our communication with our investors directly and indirectly via email, call, and everything else. We also had a lot of lot of weather-guards in place, such as seminars and in-house trainings. When it comes to investors and employees, these kind of communications are what we used. Also for the society we contributed more than $20,000 to the economy in Jordan. That was a step for us to help combat this threat. This situation needs more of holding hands together. We were trying to find solutions with our competitors and not increase or making anything more difficult. These are ways that the CFI [Credit Financier Invest – International] dealt with the situation.
Ms Aboul Hosn, Lebanese based in Dubai, has considerable experience in trading of a variety of different asset classes, Equity Capital Markets and financial market analysis. She has extensive knowledge of financial instruments such as currencies, equities, commodities and derivatives.