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Corona Capital

8 Sep 2020 By Breakingviews columnists

Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.


– Reality injection

– Bike ride to inequality

Politicized waters. AstraZeneca, Merck, Pfizer and six other pharmaceutical firms have pledged to only submit a Covid-19 vaccine for approval once their candidates have been proven safe and effective in large trials. It’s an admission that the public don’t entirely trust industry regulators, who may be tempted to short-circuit approvals on political rather than scientific timetables.

The pharmaceutical industry is highly regulated, and inevitably somewhat politicized. Decisions on which drugs are available and what prices can be charged are matters of public policy.

Approving an ineffective vaccine won’t only hurt patients, it will erode trust in pharma firms and eventually infect margins. The fact several firms said they will sell a vaccine at cost during the pandemic was one attempt to shore up public trust. Today’s pledge is another. Politicians may want solutions now, but pharma firms are focusing on long-term greed over short. (By Robert Cyran)

It was the best of times. Peloton Interactive, the $25 billion fitness platform, is slashing the cost of its main stationary bike by around 16% to $1,895. It’s also putting out a souped-up version for almost $2,500 and a lower-cost treadmill. The share price was up over 9% on the news in early trading on Tuesday, bringing the year-to-date return to over 200%. And analysts estimate that revenue will handily beat company guidance of up to $520 million when the company reports fiscal fourth-quarter earnings on Thursday, according to Refinitiv data.

Such sales are possible because the economic impact of the Covid-19 crisis is so unequal. The employment rate for Americans making over $60,000 per year has only fallen by 0.5%, according to the Opportunity Insights Economic Tracker, compared with a 16% decline for those making less than $27,000. The fitness landscape may be shifting, but the trend of inequality will probably just keep pedalling higher. (By Anna Szymanski)

Press to eject. The last two Australian reporters working in China, Bill Birtles and Mike Smith, have left for home after being questioned by China’s Ministry of State Security. It is unclear what Beijing’s primary concern was, but the episode marks a further decline in a decaying relationship, which took a major hit when Prime Minister Scott Morrison called for a global inquiry into the origins of Covid-19. Australian citizen Cheng Lei, an anchor at Chinese state television, was detained in August.

One Chinese official recently compared Australia’s behavior to Brutus’ murder of Caesar. The two nations still trade iron ore, key to restarting both pandemic-ravaged economies, but Canberra is otherwise trying to reduce its exposure, blocking acquisitions by mainland companies and banning Huawei Technologies gear from its networks. Beijing keeps slapping tariffs on Australian agriculture. The situation is bad, and getting worse. (By Jamie Lo)

Singapore Sling. Temasek isn’t getting too excited about a post-Covid recovery quite yet. The $306 billion Singapore state investor used its annual review to warn that the global market outlook remained volatile and uncertain against the backdrop of a resurgence of coronavirus infections in some countries.

Given that its year ended in March, Temasek’s minus 2.3% return in Singaporean dollar terms doesn’t say too much about Covid-19’s impact. One thing in its favour is that it seems to have stopped short of underpinning every local struggler. Despite playing a full role in Singapore Airlines’ generous support package in March, Temasek recently used a material adverse change clause to escape a $3 billion deal to raise its stake in conglomerate Keppel. That should afford some protection to its 2020 numbers. (By George Hay)

Reinventing the wheel. Pumped-up demand for bicycles, especially trendy battery-assisted ones, is showing few signs of losing pressure. With Brits avoiding public transport, retailer Halfords reported a 59% year-on-year surge in two-wheel-related sales since April. E-bikes and scooters, which have an electric motor that kicks in when the going gets tough, are proving especially popular, with sales up 230% year-on-year. Breakingviews predicted that gear-change back in July.

Happily for Halfords, the virus struck during the sunnier summer months. Lingering concerns about public transport, particularly acute in the UK, is a following wind, as are government noises about tackling national obesity. But the arrival of winter weather could mean an uphill struggle, as could rising unemployment and a damaging Brexit. Halfords shares are up 2% since January and have nearly quadrupled since their Covid-19-driven lows in March. The bike boost may be coming to the end of its natural cycle. (By Ed Cropley)


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