Dimitri Leus: The virus crisis. What about the business and how will the situation change after
Dmitry Leus, a financial expert, international investor, CEO and Founder of Imperium Investments.
The beginning of 2020, especially March-April, was a real challenge to humanity's ability not only to withstand a viral pandemic, but also to conduct "battle manoeuvres" and compare the effectiveness of various approaches of different countries in the ability to develop effective methods to counteract the pandemic in a short time and mobilise the necessary resources.
While the effectiveness of a particular method is not yet clear and what kind of behavior strategy will eventually prove more effective, but all analysts agree on one thing - this situation, this next crisis will become a new starting point in the development of almost all areas of business. What happens during quarantine and how will the picture change at the end of it?
Against the background of falling consumer demand for almost all groups of goods (except food, medical products and some areas in logistics), especially in the classic offline retail, we are watching the rapid transition of business in the Internet and strengthening its presence online.
It cannot be said that this is a new trend and that previously business did not seek to be represented in the global network, but in the current situation from an additional channel the web is becoming for many the main, and for some businesses the only way to do business. On the other hand, quarantine restrictions and self-isolation have forced many to learn to work remotely and to transfer almost all their activities from the physical to the virtual office.
The same can be said of the seemingly inviolable basis of education in all its forms.From primary to secondary school, colleges, universities moved to online learning.
Time will show how effective it is in terms of the learning process itself, but already now we can say with certainty that this may be a new turning point in the development of the direction of education as a whole.
Reduced consumption of energy resources and oil again has a global impact on both their cost and the ability of companies to partially conserve them. Here too, the key winning factor will be the technology used.
And unfortunately, Russian companies are not quite ready for such a sharp turn of the situation, and even if there is a great desire they cannot immediately switch to more advanced technologies, it takes time and additional investment.
Therefore, this issue is likely to be solved more at the political level, and it depends on this, in what direction the energy sector will develop. But the general trend towards lower consumption of energy resources will help large energy holdings, provided that they optimize their cost items, to survive this period calmly and even strengthen their market positions.
On the other hand, start-up companies that are just entering the market and are trying to gain a foothold in it, are most likely waiting for either bankruptcy or accession to the above holdings from the position of an internal supplier.
Despite the decline in mortgage rates and increased demand at the end of 2019, the real estate market is waiting for a slight speculative surge, and at first it will seem that on the contrary, the real estate market is growing, and then it is likely to move into stagnation.
Speculation and short-term growth of transactions is facilitated by the weakening of the ruble and the desire to preserve their capital in the form of real estate. But there is one point - more than half of all real estate investments are related to office and retail real estate. That is with those segments which at the moment have the greatest difficulties connected with quarantine measures.
And in view of this situation and with the strengthening of its presence on the Internet, many companies may abandon offices and move to full remote work. Therefore, in the prospect of the second half of 2020 we can talk about a significant reduction in investment in the segment of real estate.
Most likely, it will be an exchange of assets either for the purpose of capital consolidation or for the purpose of redistribution of an investment portfolio between the main segments. I think that there will also be another wave of growth in logistics and warehouse real estate by the end of the year. But time will tell.
As for stock markets and work with securities, one can observe multi-directional movements. If we consider the general market trend, it is a decline.
And it was clear and predictable at the very beginning of the "viral" recession. And it is more or less clear what period this decline will take and when we can expect stabilization of the market and recovery of lost positions.
And despite the fact that this situation is considered a global crisis, I would not compare it with the previous crisis of 2008-2009, when the market was falling every day and no one could predict when this fall will end.
Yes, there will be losses, some companies may leave the market, some companies will, on the contrary, strengthen their positions and their capitalization. There will be another "evolutionary" redistribution of capital, but in the end it will not be some global collapse of the world scale. Although the role and weight of the world's financial centers may change greatly by the end of 2020.