A dangerous gap

The market v the real economy

Financial markets have got out of whack with the economy. Something has to give

STOCKMARKET HISTORY is packed with drama: the 1929 crash; Black Monday in 1987, when share prices lost 20% in a day; the dotcom mania in 1999. With such precedents, nothing should come as a surprise, but the past eight weeks have been remarkable, nonetheless. A gut-wrenching sell-off in shares has been followed by a delirious rally in America.

Between February 19th and March 23rd, the S&P 500 index lost a third of its value. With barely a pause it has since rocketed, recovering more than half its loss. The catalyst was news that the Federal Reserve would buy corporate bonds, helping big firms finance their debts. Investors shifted from panic to optimism without missing a beat.

This rosy view from Wall Street should make you uneasy (see article). It contrasts with markets elsewhere. Shares in Britain and continental Europe, for example, have recovered more sluggishly. And it is a world away from life on Main Street.

Even as the lockdown eases in America, the blow to jobs has been savage, with unemployment rising from 4% to about 16%, the highest rate since records began in 1948. While big firms’ shares soar and they get help from the Fed, small businesses are struggling to get cash from Uncle Sam.

Wounds from the financial crisis of 2007-09 are being reopened. “This is the second time we’ve bailed their asses out,” grumbled Joe Biden, the Democratic presidential candidate, last month. The battle over who pays for the fiscal burdens of the pandemic is just beginning. On the present trajectory, a backlash against big business is likely.

Start with events in the markets. Much of the improved mood is because of the Fed, which has acted more dramatically than other central banks, buying up assets on an unimagined scale. It is committed to purchasing even more corporate debt, including high-yield “junk” bonds. The market for new issues of corporate bonds, which froze in February, has reopened in spectacular style.

Companies have issued $560bn of bonds in the past six weeks, double the normal level. Even beached cruise-line firms have been able to raise cash, albeit at a high price.

A cascade of bankruptcies at big firms has been forestalled. The central bank has, in effect, backstopped the cashflow of America Inc. The stockmarket has taken the hint and climbed.

The Fed has little choice—a run on the corporate-bond market would worsen a deep recession. Investors have cheered it on by piling into shares.

They have nowhere else good to put their cash. Government-bond yields are barely positive in America. They are negative in Japan and much of Europe. You are guaranteed to lose money by holding them to maturity, and if inflation rises the losses would be painful.

So stocks are appealing. By late March prices had fallen by enough to tempt the braver sort. They steeled themselves with the observation that much of the stockmarket’s value is tied to profits that will be made long after the covid-19 slump has given way to recovery.

Tellingly, though, the recent rise in share prices has been uneven. Even before the pandemic the market was lopsided, and it has become more so. Bourses in Britain and continental Europe, chock-full of troubled industries like carmaking, banking and energy, have lagged behind, and there are renewed jitters over the single currency).

In America investors have put even more faith in a tiny group of tech darlings—Alphabet, Amazon, Apple, Facebook and Microsoft—which now make up a fifth of the S&P 500 index.

There is little euphoria, just a despairing reach for the handful of businesses judged to be all-weather survivors.

At one level, this makes good sense. Asset managers have to put money to work as best they can. But there is something wrong with how fast stock prices have moved and where they have got back to. American shares are now higher than they were in August. This would seem to imply that commerce and the broader economy can get back to business as usual. There are countless threats to such a prospect, but three stand out.

The first is the risk of an aftershock. It is entirely possible that there will be a second wave of infections. And there are also the consequences of a steep recession to contend with—American GDP is expected to drop by about 10% in the second quarter compared with a year earlier.

Many individual bosses hope that ruthless cost-cutting can help protect their margins and pay down the debts accumulated through the furlough. But in aggregate this corporate austerity will depress demand. The likely outcome is a 90% economy, running far below normal levels.

A second hazard to reckon with is fraud. Extended booms tend to encourage shifty behaviour, and the expansion before the covid crash was the longest on record. Years of cheap money and financial engineering mean that accounting shenanigans may now be laid bare.

Already there have been two notable scandals in Asia in recent weeks, at Luckin Coffee, a Chinese Starbucks wannabe, and Hin Leong, a Singaporean energy trader that has been hiding giant losses (see article). A big fraud or corporate collapse in America could rock the markets’ confidence, much as the demise of Enron shredded investors’ nerves in 2001 and Lehman Brothers led the stockmarket down in 2008.

The most overlooked risk is of a political backlash. The slump will hurt smaller firms and leave the bigger corporate survivors in a stronger position, increasing the concentration of some industries that was already a problem before the pandemic. A crisis demands sacrifice and will leave behind a big bill.

The clamour for payback will only grow louder if big business has hogged more than its share of the subsidies on offer. It is easy to imagine windfall taxes on bailed-out industries, or a sharp reversal of the steady drop in the statutory federal corporate-tax rate, which fell to 21% in 2017 after President Donald Trump’s tax reforms, from a long-term average of well over 30%. Some Democrats want to limit mergers and stop firms returning cash to their owners.

For now, equity investors judge that the Fed has their back. But the mood of the markets can shift suddenly, as an extraordinary couple of months has proved. A one-month bear market scarcely seems enough time to absorb all the possible bad news from the pandemic and the huge uncertainty it has created. This stockmarket drama has a few more acts yet.

A pandemic of power grabs

Autocrats see opportunity in disaster

The world is distracted and the public need saving. It is a strongman’s dream

ALL THE world’s attention is on covid-19. Perhaps it was a coincidence that China chose this moment to tighten its control around disputed reefs in the South China Sea, arrest the most prominent democrats in Hong Kong and tear a hole in Hong Kong’s Basic Law. But perhaps not.

Rulers everywhere have realised that now is the perfect time to do outrageous things, safe in the knowledge that the rest of the world will barely notice. Many are taking advantage of the pandemic to grab more power for themselves.

China’s actions in Hong Kong are especially troubling. Since Britain handed the territory back to China in 1997, Hong Kong has been governed under the formula of “one country, two systems”. By and large, its people enjoy the benefits of free speech, free assembly and the rule of law. Foreign firms have always felt safe there, which is why Hong Kong is such an important financial hub.

But China’s ruling Communist Party has long yearned to crush Hong Kong’s culture of protest. Article 22 of the Basic Law (a kind of mini-constitution) bans Chinese government offices from interfering in Hong Kong’s internal affairs. That was always understood to include its Liaison Office in Hong Kong.

But on April 17th the office, China’s main representative body in the territory, said it was not bound by Article 22. This suggests that it plans to step up its campaign to curtail Hong Kong’s freedoms.

Xi Jinping’s incremental power grab in Hong Kong is one of many. All around the world, autocrats and would-be autocrats spy an unprecedented opportunity. Covid-19 is an emergency like no other. Governments need extra tools to cope with it.

No fewer than 84 have enacted emergency laws vesting extra powers in the executive. In some cases these powers are necessary to fight the pandemic and will be relinquished when it is over.

But in many cases they are not, and won’t be. The places most at risk are those where democracy’s roots are shallow and institutional checks are weak.

Take Hungary, where the prime minister, Viktor Orban, has been eroding checks and balances for a decade. Under a new coronavirus law, he can now rule by decree. He has become, in effect, a dictator, and will remain so until parliament revokes his new powers.

Since it is controlled by his party, that may not be for a while. Hungary is a member of the European Union, a club of rich democracies, yet it is acting like Togo or Serbia, whose leaders have just assumed similar powers on the same pretext.

Everywhere people are scared. Many wish to be led to safety. Wannabe strongmen are grabbing coercive tools they have always craved—in order, they say, to protect public health. Large gatherings can be sources of infection; even the most liberal governments are restricting them.

Autocrats are delighted to have such a respectable excuse for banning mass protests, which over the past year have rocked India, Russia and whole swathes of Africa and Latin America.

The pandemic gives a reason to postpone elections, as in Bolivia, or to press ahead with a vote while the opposition cannot campaign, as in Guinea. Lockdown rules can be selectively enforced. Azerbaijan’s president openly threatens to use them to “isolate” the opposition. Relief cash can be selectively distributed.

In Togo you need a voter ID, which opposition supporters who boycotted a recent election tend to lack. Minorities can be scapegoated. India’s ruling party is firing up Hindu support by portraying Muslims as covid-19 vectors.

Fighting the virus requires finding out who is infected, tracing their contacts and quarantining them.

That means more invasions of privacy than people would accept in normal times. Democracies with proper safeguards, like South Korea or Norway, will probably not abuse this power much. Regimes like China’s and Russia’s are eagerly deploying high-tech kit to snoop on practically everyone, and they are not alone. Cambodia’s new emergency law places no limits on such surveillance.

False information about the disease can be dangerous. Many regimes are using this truism as an excuse to ban “fake news”, by which they often mean honest criticism. Peddlers of “falsehood” in Zimbabwe now face 20 years in prison.

The head of a covid-19 committee under Khalifa Haftar, a Libyan warlord, says: “We consider anyone who criticises to be a traitor.” Jordan, Oman, Yemen and the United Arab Emirates have banned print newspapers, claiming that they might transmit the virus.

Judging by what has already been reported, power grabbers on every continent are exploiting covid-19 to entrench themselves. But with journalists and human-rights activists unable to venture out, nobody knows whether the unreported abuses are worse. How many dissidents have been jailed for “violating quarantine rules”?

Of the vast sums being mobilised to tackle the pandemic, how much has been stolen by strongmen and their flunkeys? A recent World Bank study found that big inflows of aid to poor countries coincided with big outflows to offshore havens with secretive shell companies and banks—and that was before autocrats started grabbing covid-related emergency powers. Better checks are needed.

“Right now it is health over liberty,” says Thailand’s autocratic prime minister, Prayuth Chan-ocha. Yet many of the liberty-constricting actions taken by regimes like his are bad for public health. Censorship blocks the flow of information, frustrating an evidence-based response to the virus. It also lets corruption thrive. Partisan enforcement of social distancing destroys the trust in government needed if people are to follow the rules.

Cruel, but inept

Where does this lead? Covid-19 will make people poorer, sicker and angrier. The coronavirus is impervious to propaganda and the secret police. Even as some leaders exploit the pandemic, their inability to deal with popular suffering will act against the myth that they and their regimes are impregnable.

In countries where families are hungry, where baton-happy police enforce lockdowns and where cronies’ pickings from the abuse of office dwindle along with the economy, that may eventually cause some regimes to lose control.

For the time being, though, the traffic is in the other direction. Unscrupulous autocrats are exploiting the pandemic to do what they always do: grab power at the expense of the people they govern.

Why the European Central Bank can save the eurozone

It has near-unlimited firepower and is the only EU institution willing and able to act

Martin Wolf

Lagarde Superhero
© James Ferguson

Will the eurozone survive Covid-19? If it does, it will be for the same two reasons it survived the financial crisis: fear of a ruinous break-up and action by the one institution able to do so on the scale needed.

In July 2012, Mario Draghi told an audience in London: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” The ECB is saying this now. It should be enough.

The pandemic is creating an enormous common shock. But it has asymmetric results. Among larger member countries, the brunt of the disease has fallen on Italy and Spain, although France has been catching up.

According to the IMF, the eurozone’s gross domestic product will shrink by 7.5 per cent this year; Germany’s GDP will fall 7 per cent, but Italy’s by 9.1 per cent. Its Fiscal Monitor forecasts the eurozone fiscal deficit at 7.5 per cent, Germany’s at 5.5 per cent and Italy’s at 8.3 per cent.

G0826_20X Chart showing Services purchasing managers’ indices

Alas, even this looks optimistic. The “baseline” projection of the IMF’s World Economic Outlook assumes that shutdowns will end in the second quarter of 2020. But it is quite likely that they will not, or that they will need to be repeated. In the baseline scenario, the GDP of high-income countries shrinks by 2 per cent between 2019 and 2021.

In the worst alternative — a lengthier shutdown now, followed by another in 2021 — GDP would be almost 10 per cent lower in 2021 than in 2019.

Yet, even on its baseline view, the IMF forecasts Italy’s gross public debt at 156 per cent of GDP this year, up from 135 per cent last year. Debt is set to become mountainous for several eurozone members in the years ahead.

G0826_20X chart showing Forecast GDP growth in the Covid-19 crisis

This realisation has raised what is euphemistically called “redenomination risk” — fears of defaults, financial crises and finally even exits from the eurozone. So spreads between the yield on Italian debt and the GDP-weighted eurozone average began to rise, helped along by an unfortunate remark of its president, Christine Lagarde, that it was not the ECB’s role to “close the spread”.

With its €750bn Pandemic Emergency Purchase Programme, launched on March 18, the ECB undid the harm.

Isabel Schnabel, German member of the board, has laid out its rationale. The ECB, she explained, has two overarching objectives, “to restore the orderly functioning of euro area financial markets” and to ensure that “our accommodative monetary policy continued to be transmitted to all parts of the single currency área”.

G0826_20X chart showing change in fiscal balance as a % of GDP, 2019 to 2020

Redenomination risk imperils both objectives. This gives the ECB a potentially unlimited obligation to intervene. Moreover, since the biggest challenge has been the “heterogeneity” of conditions across the eurozone, the ECB needs to act “flexibly across time, asset classes and jurisdictions”, as the PEPP now permits.

The ECB has duly brought Greece back into its fold. The PEPP itself is limited in time and scale. But its stated objectives mean that the ECB has to do even more if needed. In essence, the ECB is committed to acting as if it were the national central bank of every member. Since it issues the world’s second-most-accepted reserve currency, it has the capacity to do so.

G0826_20X chart showing yield on eurozone 10-year government bond  and spreads

Technically, in a disinflationary or deflationary situation, such as today’s, a central bank has unlimited firepower. It can buy anything, at any price it wants, subject to just three constraints: first, it might overdo intervention, so triggering flight from the currency and inflation; second, it might exceed its legal powers; finally, it might destroy the political consensus that created it.

The inflation constraint is hardly binding today. At some point, however, the ECB might want to reverse its interventions and so sell the bonds it holds. This could create problems for the most indebted governments. On the legalities, the German constitutional court and the European Court of Justice have found in favour of the ECB, so far.

The ECJ surely always will, provided the ECB is careful. The German court might rule against the ECB. That would at once create a political crisis. Germany has a credible exit option.

But a return to the D-Mark would create a huge economic and political shock. Germans would be mad to exercise their option, however much they may hate the ECB’s actions.

G0826_20X chart showing eurozone GDP-weighted sovereign bond yield curve

In brief, the ECB has to do whatever it takes to help every eurozone member manage this crisis. So what about the parallel discussions of the role of the European Stability Mechanism, “coronabonds” or some similar alternatives?

The ESM seems irrelevant. Its firepower is far too small. So it matters only to the extent that it might trigger the ECB’s Outright Monetary Transactions programme, invented in 2012. But, given the subsequent development of ECB asset purchases, the OMT is no longer relevant.

Moreover, the ESM’s conditionality — if not now, then later, when rollovers come due — makes its loans anathema. These would also be divisive, when solidarity is required.

G0826_20X   showing the difference between nominal GDP growth (three-year average) and 10-year bond yields

Politically, a common financial instrument (“coronabonds”) is attractive to some, but anathema to others. It will not happen. Yet such an instrument provides the obvious exit for the ECB when it wishes to sell the bonds it is about to acquire.

Otherwise, there could be difficulties with the debt mountains in future. Yet, provided interest rates stay low and the ECB supportive, it may be surprising how much debt is sustainable. It is debt’s costs, not its levels, that determines sustainability.

The collapse of the eurozone would be a catastrophe. The ECB is the one institution able and willing to act. Governments should back it. They also need to consider how to clean up the debt when all is over.

Now is a time for action: “whatever it takes”, once again.

The old are not equally vulnerable to Covid-19

Reducing pensioners to ‘old dears’ ignores their wisdom and physical vitality

Camilla Cavendish

Artwork for FTWeekend Comment - issue dated 09.05.20
© Jonathan McHugh 2020

If there was ever a story to brighten our corona winter and ram home the message that not all 70-somethings are the same, it is that of Graham Walters. Aged 72, Mr Walters set out for Antigua in January, in a boat he built in his garden in Leicestershire. By rowing solo across the Atlantic, he broke three world records.

But he has landed in a totally different world, one in which he could now be condemned to grey lockdown because of his age.

Two months ago, UK prime minister Boris Johnson announced that the over-70s, pregnant women and those suffering serious health conditions should avoid all social contact for 12 weeks. That made sense at the time, because it was clear that Covid-19 hits the oldest hard.

But a proposal to extend restrictions on all over-70s when the UK eases lockdown from this Sunday, lumps pensioners together in a way that feels unjust — and unscientific.

I do not underplay the risks of age. The explorer Robin Hanbury-Tenison, surely one of the fittest 83-year-olds on the planet, has only narrowly survived the virus after 49 days in hospital.

Still, age is a blunt indicator.

Almost half of Covid-19 patients in NHS intensive care units last week were under 60, and most of those whose cases turn critical have chronic health conditions. We know that men appear to suffer worse from the virus than women and that obesity is a significant risk factor. But no one is suggesting that fat men should stay in quarantine longer than everyone else.

While the World Health Organization identifies being over 60 as a key risk factor in this pandemic, there seems to be a steep age gradient. South Korean data suggest the risk of dying is 1.8 per cent in patients aged between 60-69, 6.3 per cent for those aged 70-79, and a whopping 13 per cent for the over-80s.

We don’t yet know how much of this increase is purely due to age, versus the chronic diseases the elderly are more likely to suffer. All of this matters, because over the past 20 years there has been a dramatic decoupling of chronological from biological age.

Some people are physiologically “old” at 60; others spry at 80.

Japanese gerontologists talk about the “young-old” — citizens between 60 and 75 so much fitter than previous generations that they are a different physiological tribe.

In the US, a group of septuagenarian joggers were found to be 30 years biologically younger than their sedentary peers, with stronger muscle mass and immune systems.

Will Covid-19 attack them equally?

Frustratingly, researchers show little interest in trying to find out. They routinely lump all pensioners together, as does society.

Much of the language around shielding and isolation portrays older people as helpless victims.

Yet only two months ago many were pillars of their communities, picking up grandchildren from school, running pubs, and manning phone lines for the same mental health services that they may soon need in the quiet desperation of enforced isolation.

Having spent three years researching the young-old, I have a Rolodex unusually weighted with septuagenarians. Some are world experts in fields ranging from biology to finance. Many are passionate exercisers, who very much want to get back to their day jobs.

None wish to burden their families or the NHS. Those with underlying health conditions are very unlikely to take foolish risks; they will use their common sense.

On Sunday, the prime minister will announce plans to reopen the economy while trying to avoid an overwhelming second wave of infection. In his in-tray is a proposal for the government to relax restrictions on 60 per cent of the UK population while extending the lockdown for the vulnerable and everyone over 70.

The modelling assumes the relative risk of severe disease in this group is 16:1. But it makes no attempt to stratify risk within the over-70s. We need more transparency about the conditions that make us vulnerable.

The current UK guidance is that everyone over 70 is “clinically vulnerable”, regardless of medical conditions. This puts them one step down from the 1.5m “extremely critically vulnerable” people being “shielded”, with food parcels delivered to their homes.

Age UK worries that this language is confusing.

It also worries about the effect of isolation on people who had lived independently but now struggle without social networks.

“They are on no one’s list,” says Caroline Abrahams, the group’s charity director.

This invisible group is not on community WhatsApp groups, and exists in the public imagination only as “old dears” who should keep out of the way while the rest get back to normal.

The price of that could be high.

One advantage of age is wisdom and perspective.

The jolliest care home I’ve ever visited is in the Netherlands where college students live with the residents.

The board tried to stop this, warning that students might infect the place with “sex, drugs and rock ’n’ roll”. But the manager told me, her eyes glinting, “my residents have all brought up families. They’ve made tough decisions.

They know about sex, drugs and rock n’roll”.

Many over-70s will continue to take extensive precautions, whatever the government does. But the fittest may prefer to do the school run, allowing others to return to work, and keep up a stringent exercise regime.

Mr Johnson is aware of this. “Millions of active people over 70 may feel . . . there is something excessive about these measures,” he said in March.

What he should do now is to treat older people like the grown-ups they are: level with them about the facts, and ask scientists to stop assuming everyone is equally “old”.
The writer is the author of “Extra Time”, and advises the UK Department of Health and Social Care

‘Instead of Coronavirus, the Hunger Will Kill Us.’ A Global Food Crisis Looms.

The world has never faced a hunger emergency like this, experts say. It could double the number of people facing acute hunger to 265 million by the end of this year.

By Abdi Latif Dahir

In Kibera, the largest slum in Nairobi, Kenya, residents already live in extreme poverty. Coronavirus lockdowns have caused many more to go hungry.Credit...Tyler Hicks/The New York Times

NAIROBI, Kenya — In the largest slum in Kenya’s capital, people desperate to eat set off a stampede during a recent giveaway of flour and cooking oil, leaving scores injured and two people dead.

In India, thousands of workers are lining up twice a day for bread and fried vegetables to keep hunger at bay.

And across Colombia, poor households are hanging red clothing and flags from their windows and balconies as a sign that they are hungry.

“We don’t have any money, and now we need to survive,” said Pauline Karushi, who lost her job at a jewelry business in Nairobi, and lives in two rooms with her child and four other relatives. “That means not eating much.”

The coronavirus pandemic has brought hunger to millions of people around the world. National lockdowns and social distancing measures are drying up work and incomes, and are likely to disrupt agricultural production and supply routes — leaving millions to worry how they will get enough to eat.

The coronavirus has sometimes been called an equalizer because it has sickened both rich and poor, but when it comes to food, the commonality ends. It is poor people, including large segments of poorer nations, who are now going hungry and facing the prospect of starving.

“The coronavirus has been anything but a great equalizer,” said Asha Jaffar, a volunteer who brought food to families in the Nairobi slum of Kibera after the fatal stampede. “It’s been the great revealer, pulling the curtain back on the class divide and exposing how deeply unequal this country is.”

Already, 135 million people had been facing acute food shortages, but now with the pandemic, 130 million more could go hungry in 2020, said Arif Husain, chief economist at the World Food Program, a United Nations agency. Altogether, an estimated 265 million people could be pushed to the brink of starvation by year’s end.

“We’ve never seen anything like this before,” Mr. Husain said. “It wasn’t a pretty picture to begin with, but this makes it truly unprecedented and uncharted territory.”

The world has experienced severe hunger crises before, but those were regional and caused by one factor or another — extreme weather, economic downturns, wars or political instability.

This hunger crisis, experts say, is global and caused by a multitude of factors linked to the coronavirus pandemic and the ensuing interruption of the economic order: the sudden loss in income for countless millions who were already living hand-to-mouth; the collapse in oil prices; widespread shortages of hard currency from tourism drying up; overseas workers not having earnings to send home; and ongoing problems like climate change, violence, population dislocations and humanitarian disasters.

Already, from Honduras to South Africa to India, protests and looting have broken out amid frustrations from lockdowns and worries about hunger. With classes shut down, over 368 million children have lost the nutritious meals and snacks they normally receive in school.

There is no shortage of food globally, or mass starvation from the pandemic — yet. But logistical problems in planting, harvesting and transporting food will leave poor countries exposed in the coming months, especially those reliant on imports, said Johan Swinnen, director general of the International Food Policy Research Institute in Washington.

While the system of food distribution and retailing in rich nations is organized and automated, he said, systems in developing countries are “labor intensive,” making “these supply chains much more vulnerable to Covid-19 and social distancing regulations.”

Yet even if there is no major surge in food prices, the food security situation for poor people is likely to deteriorate significantly worldwide. This is especially true for economies like Sudan and Zimbabwe that were struggling before the outbreak, or those like Iran that have increasingly used oil revenues to finance critical goods like food and medicine.

In Venezuela, the pandemic could deal a devastating blow to millions already living in the world’s largest economic collapse outside wartime.

In the sprawling Petare slum on the outskirts of the capital, Caracas, a nationwide lockdown has left Freddy Bastardo and five others in his household without jobs. Their government-supplied rations, which had arrived only once every two months before the crisis, have long run out.

“We are already thinking of selling things that we don’t use in the house to be able to eat,” said Mr. Bastardo, 25, a security guard. “I have neighbors who don’t have food, and I’m worried that if protests start, we wouldn’t be able to get out of here.”

Uncertainty over food is also building in India, where daily-wage workers with little or no social safety net face a future where hunger is a more immediate threat than the virus.

As wages have dried up, half a million people are estimated to have left cities to walk home, setting off the nation’s “largest mass migration since independence,” said Amitabh Behar, the chief executive of Oxfam India.

On a recent evening, hundreds of migrant workers, who have been stuck in New Delhi after a lockdown was imposed in March with little warning, sat under the shade of a bridge waiting for food to arrive. The Delhi government has set up soup kitchens, yet workers like Nihal Singh go hungry as the throngs at these centers have increased in recent days.

“Instead of coronavirus, the hunger will kill us,” said Mr. Singh, who was hoping to eat his first meal in a day. Migrants waiting in food lines have fought each other over a plate of rice and lentils. Mr. Singh said he was ashamed to beg for food but had no other option.

“The lockdown has trampled on our dignity,” he said.

Refugees and people living in conflict zones are likely to be hit the hardest.

The curfews and restrictions on movement are already devastating the meager incomes of displaced people in Uganda and Ethiopia, the delivery of seeds and farming tools in South Sudan and the distribution of food aid in the Central African Republic. Containment measures in Niger, which hosts almost 60,000 refugees fleeing conflict in Mali, have led to surges in the pricing of food, according to the International Rescue Committee.

The effects of the restrictions “may cause more suffering than the disease itself,” said Kurt Tjossem, regional vice president for East Africa at the International Rescue Committee.

Ahmad Bayoush, a construction worker who had been displaced to Idlib Province in northern Syria, said he and many others had signed up to receive food from aid groups, but that it had yet to arrive.

“I am expecting real hunger if it continues like this in the north,” he said.

The pandemic is also slowing efforts to deal with the historic locust plague that has been ravaging the East and Horn of Africa. The outbreak is the worst the region has seen in decades and comes on the heels of a year marked by extreme droughts and floods. But the arrival of billions of new swarms could further deepen food insecurity, said Cyril Ferrand, head of the Food and Agriculture Organization’s resilience team in eastern Africa.

Travel bans and airport closures, Mr. Ferrand said, are interrupting the supply of pesticides that could help limit the locust population and save pastureland and crops.

As many go hungry, there is concern in a number of countries that food shortages will lead to social discord. In Colombia, residents of the coastal state of La Guajira have begun blocking roads to call attention to their need for food. In South Africa, rioters have broken into neighborhood food kiosks and faced off with the police.

And even charitable food giveaways can expose people to the virus when throngs appear, as happened in Nairobi’s shantytown of Kibera earlier this month.

“People called each other and came rushing,” said Valentine Akinyi, who works at the district government office where the food was distributed. “People have lost jobs. It showed you how hungry they are.”

To assuage the impact of this crisis, some governments are fixing prices on food items, delivering free food and putting in place plans to send money transfers to the poorest households.

Yet communities across the world are also taking matters into their own hands. Some are raising money through crowdfunding platforms, while others have begun programs to buy meals for needy families.

On a recent afternoon, Ms. Jaffar and a group of volunteers made their way through Kibera, bringing items like sugar, flour, rice and sanitary pads to dozens of families. A native of the area herself, Ms. Jaffar said she started the food drive after hearing so many stories from families who said they and their children were going to sleep hungry.

The food drive has so far reached 500 families. But with all the calls for assistance she’s getting, she said, “that’s a drop in the ocean.

Reporting was contributed by Anatoly Kurmanaev and Isayen Herrera from Caracas, Venezuela; Paulina Villegas from Mexico City; Julie Turkewitz from Bogotá, Colombia; Ben Hubbard and Hwaida Saad from Beirut, Lebanon; Sameer Yasir from New Delhi; and Hannah Beech from Bangkok.

China’s New Infrastructure Push Isn’t All New

Beijing wants to invest in ‘new infrastructure’ such as data centers and artificial intelligence, but for investors the impact is easily overhyped

By Jacky Wong

Work at the construction site of a 5G base station at Chongqing Hi-tech Zone in Chongqing, southwest China, April 15. Photo: Wang Quanchao/Zuma Press .

As China prepares to accelerate public investments to kick-start its economy following the coronavirus shutdowns, “new infrastructure” has become a buzzword for brokers to sell investment ideas.

Beijing has suggested it could take the opportunity to push for a technology-driven structural upgrade of its economy, boosting industry productivity and innovation. So-called new infrastructure encompasses a range of sectors, from 5G and artificial intelligence to data centers and electric-vehicle charging stations.

The idea has some merit: The new areas seem likely to offer a better return on investment than building yet more roads and bridges on top of China’s already-excellent infrastructure.

It is true that China will likely ramp up infrastructure spending this year, after a lull as Beijing has tried to contain debt growth. Local governments have issued more than 1 trillion yuan ($141 billion) of “special bonds” this year, with most of the money likely earmarked for infrastructure spending.

However, investors need to treat the new-infrastructure pitch with caution. While spending on the new areas will likely grow at a faster rate, conventional infrastructure will still do the heavy lifting. Goldman Sachsestimated that total investment in new infrastructure would reach 2.3 trillion yuan ($325 billion) by next year, but would still make up only 10% of total infrastructure spending.

Moreover, a big chunk of the new-infrastructure spending will go on projects that would previously have counted as conventional infrastructure, like subways, intercity rail and ultrahigh voltage (UHV) electricity transmission.

Some of those projects, like building out the 5G network, may have happened even without the current push. For areas like data centers and artificial intelligence, the government may offer favorable policies, but private companies will play a crucial role in determining the actual level of investments. New or not, the scale of projects will still be limited by stretched household and bank balance sheets.

Nevertheless, the theme has been good for investors so far. CSI New Infrastructure Theme Index, a benchmark that was only launched last month, has risen 13% this year. Some of the stocks have done much better: Nasdaq-listed data center services provider 21Vianet has surged 124%, while Shanghai-listed China XD Electric, expected to benefit from the UHV build out, has gained 82%.

Investors trying to play China’s latest infrastructure push need to be good at seeing through hope and hype.

Crunch time for US tenants and landlords

Investors who saw rental housing as a safe bet before the pandemic are bracing for delinquencies

Joshua Chaffin in New York

Last year, the multifamily housing sector attracted $184bn in investment © Bloomberg

In the late stages of the recently concluded US economic expansion, cautious investors prepared for the possibility of a downturn by pouring money into an unsexy sector of the real estate industry: rental apartments.

In the real estate world, multifamily housing, as the sector is known, is renowned for its safety because, the thinking goes, people will always need a place to live. While they may cut back on luxuries, preserving a roof over their head is a priority.

That thesis is now being put to the test as unemployment surges during coronavirus lockdowns.

Thousands of Americans are expected to take to the streets on Friday in support of a rent strike prompted by the pandemic, and landlords like Norman Radow of Atlanta, Georgia, can only guess about how much rent they can expect from their properties.

“Twenty-eight per cent of the families in this state are living hand-to-mouth and in fear,” said Mr Radow, citing recent jobless claims in Georgia. The residents of his mostly “class-B” properties — spread out across his home state and seven others — tend to earn about $45,000 per year, he noted. “They don’t have a month saved up to cover.”

In April, landlords fared better than many expected. As of April 26, 91.5 per cent of households had paid rent, according to the National Multifamily Housing Council, a developers group.

That was down 4.1 percentage points from the same period a year earlier.

But most expect May to be worse. The economy was only just shutting down in many places by the time April rent was due. In the interim, millions of workers have been laid off.

Compounding problems, many states have been slow to process the enormous volume of unemployment claims.

“There are still a lot of families living pay-cheque to pay-cheque and they’re evaluating their situation week-to-week,” said Priscilla Almodovar, the chief executive of Enterprise Community Partners, a non-profit that focuses on affordable housing.

Ms Almodovar is particularly worried about what will happen in August — by which time the $600-per-week unemployment insurance supplement included in the federal stimulus bill will expire. “Unless new relief comes out of Washington, what happens on August 1?” she asked.In the meantime, some landlords believe that politicians are worsening their plight by giving encouragement to tenants who do not wish to pay.

Temporary bans on evictions have sprung up across the country. Some politicians are calling for more dramatic relief. Alexandria Ocasio-Cortez, whose congressional district in the New York City boroughs of the Bronx and Queens has been devastated by coronavirus, is supporting proposed legislation that would cancel rent for the duration of the pandemic.“People aren’t striking because they don’t feel like paying rent.

They’re striking because they can’t pay rent,” Ms Ocasio-Cortez said. Such a solution would hurt landlords, who still have to pay property taxes and other overheads. Depending on how it is implemented, it could also inflict wider damage on the economy, according to David Stern, president of Townhouse Partners, a due diligence firm that services commercial real estate clients.

“It trickles up,” Mr Stern said. “If the renter cannot pay the lease, then the owner can’t pay the lender, and the lender — whoever that is — can’t repay its investors.” Ms Almodovar, a former JPMorgan banker, agreed. She supports a plan popular with many developers: to provide some future assistance to renters in the form of a credit that would go directly to cover rent.

“They’re both in it together,” she said of renters and owners. “It’s not constructive to pit one against the other.”

Prior to the pandemic, the multifamily sector was thriving. In 2019, it attracted $184bn in investment, according to Real Capital Analytics — more than any other real estate category and the highest level since the firm began tracking the sector in 2000. In January and February, investment was up 13.2 per cent over the same period last year while rent growth was far outpacing inflation in markets like Phoenix and Nashville.

Then came the pandemic.Mr Radow has seen distress before. His firm, Radco, was hired by Lehman Brothers three days after its collapse to begin overseeing the liquidation of its vast real estate portfolio.

He remembers being brought a trolley cart of files, and then instructed: “They’re all yours.

Everyone was fired. Figure them out.” Mr Radow remains convinced that multifamily will again prove its resilience, even if delinquencies rise and rents decline. For April, his revenues were about 6.5 per cent lower than March. In an email to staff, he urged them to have empathy and “understand the pain and fear” of their tenants.

By contrast, he could not see any market for hotel rooms — or predict when might one return.

He also believes demand for office and retail space will decline well after the crisis has passed.

“I think it’s the safest place to be right now,” he said of multifamily housing.

That is not to say everyone who put money into rental apartments will be safe. Even before the pandemic, veteran multifamily investors were raising eyebrows at the prices newcomers were paying, and the debt they were taking on to do so.

Operators are now facing higher costs for services such as cleaning while social distancing rules are forcing them to use virtual tours to show apartments. The extent of the damage will also depend on what people own — and where. There are properties in Orlando and Las Vegas where residents are largely employed by local resorts that are now shut down.

The delinquency rates there could be much higher than elsewhere, developers worry. There is also Texas, which is grappling not only with the pandemic but the collapse of the energy sector.

In December, Mr Radow said he unloaded a portfolio that included 10 properties in Texas and Oklahoma.

It was part of a broader shift in which he trimmed his portfolio from a recent high of 29,000 units built up during this cycle to about 12,000.

“We expected a bad recession,” he explained. But not this.