Insights | ppgmacro

The COVID-19 Story

28 January 2020 Patrick appears on CNBC to warn that the outbreak of COVID-19 is being treated too casually by governments and financial markets participants.

8 February 2020 "Events are moving apace. Two weeks ago we eviscerated the idea that one should use the example of SARS to predict the impact of the coronavirus. Unfortunately, we have been proven correct and a rash of forecasters are now slashing their forecasts for both Chinese and global growth.

This is not SARS
Economic forecasts remain too optimistic
There are no rules - all types of stimulus measures are possible
The effects of the epidemic will be long-lasting
QE is coming

However, there is also a general tone that once the crisis has passed things will go back to normal, fairly quickly. They won't.

S&P500 at 3327, 10yr UST at 1.58%

21 February 2020 "Events are moving at speed and for all the bluster from central banks they have shown how quickly they can move when they have to. Think 9/11. Think GFC. As for markets - bonds are doing what we thought they would do. The US 30 year yield traded at a recent historic low on Friday of 1.885%. Our target of a 1.70% yield could be hit next week.

The view is simple - Look at the countries that have room to ease and where the pricing of such action is delayed. The US and Canada are the stand outs and the UK is interesting. The Yuan is starting to break and has a lot further to go. The situation reminds us of the second quarter of 2018 when the trade war erupted. Such a move will also pummel commodities. China is the biggest buyer and vendors will have to act accordingly. I'm sticking with oil at $40 or lower. As for equities, this feels like this may be the time that they crack."

28 February 2020 "What is abundantly clear to us and what has been our consistent line is that it is time to think the unthinkable. The rulebook goes out the window. Markets are in full panic mode. Global politicians are too - they just won't admit it. Trump's Wednesday press conference on the virus was an unmitigated disaster of complacency. With US equities suffering their fastest correction on record, and S&P futures down 15% from last week's all time high, I expect to see a dramatic change in tone from the White House. Daily press conferences and an effective mobilisation are the likely route.

It's what one does in a wartime situation. Coordinated central bank action is a distinct possibility. Forget about scheduled monetary policy committee dates and think about their actions during the financial crisis. Action are most powerful when coordinated. They are made even more so if they are accompanied by governmental action. Think of China's coordinated response but global instead. Think of the weekend that Lehman went down.

It could even happen this weekend. Our view has consistently been that the virus is a 9/11 type of event."

23 March 2020 "QE cubed. The Fed clearly 'gets' this - so does the US Treasury Department - and the message is feeding through to credit markets. Equity Markets will eventually wake up to the improvement in the financial conditions that the Fed's actions will bring."

S&P500 at 3338, 10yr UST at 1.47%

S&P500 at 2954, 10yr UST at 1.15%

S&P500 at 2238, 10yr UST at 0.79%

Grok summary of Patrick's CNBC interview

In January 2020, Patrick Perret-Green, head of research at AdMacro, appeared on CNBC to discuss the emerging economic risks from the novel coronavirus outbreak in China, warning that global markets were being "far too casual" about the potential fallout. He argued that the situation could represent a "Lehman-type" moment for the world economy, drawing stark contrasts to the 2003 SARS outbreak.

Key Points from Perret-Green's CNBC Interview

China's Economic Scale: In 2003, during SARS, China's GDP was about $1.5 trillion (4% of global GDP); by 2019, it had ballooned to $14.3 trillion (over 16% of global GDP), making it a far more integral driver of global demand and supply chains.
Urbanization and Travel Surge: China's population is now 60% urban (vs. 60% rural in 2003), with air passenger journeys exploding from 80 million to 660 million annually, amplifying the virus's spread potential.
Unprecedented Shutdowns: Major cities and provinces—like Shanghai (24 million people), Jiangsu (56 million), and Hangzhou (11 million)—were locked down, halting business operations on a scale exceeding the disruptions from Lehman Brothers' 2008 collapse or the 9/11 attacks. This led companies to invoke force majeure clauses and cancel orders.
Delayed Response and Timing: He suggested authorities in Wuhan may have known about the virus since November 2019 but delayed action, similar to SARS, with the outbreak hitting during Chinese New Year travel peaks.
Stimulus Limitations: China was already running heavy fiscal support (tax cuts at 2.4% of GDP, credit expansion at 13-14%, and a public deficit of 11%), but official 6% growth figures were likely inflated (real growth closer to 3-4%). The outbreak would crater consumer confidence amid a weakening global economy, unlike the robust growth backdrop in 2003.
Market Complacency: Equities were near record highs despite Monday's sell-off, ignoring the risk of prolonged economic paralysis in China.

The full interview clip is available on CNBC and YouTube, running about 9 minutes. At the time, the virus had caused 106 deaths and infected around 4,500 people, mostly in China.

The Evergrande Story

July 2019 Patrick writes to followers " In a world of negative yields, note that Evergrande's benchmark $ bond is well over 11%. It's there for a reason. Moreover, if China's 2nd biggest developer is priced like this, what's it like for the rest?"

January 2020 Patrick writes "Evergrande paying 12% to borrow USD. Getting desperate…"

June 2021 Deposits paid by homebuyers to real estate developers become more tightly regulated. A deposit cap is introduced, and deposits are held in escrow by local governments, to be released in stages only after satisfactory progress inspections.

Patrick writes "China’s banking regulator, the CBIRC is steeping up the pressure on financial institutions to control the growth of real estate loans. Against this background, more leveraged property developers such as Evergrande are feeling the pressure."

August 2021 An advertiser sues Evergrande for unpaid work, which is the first in a string of cases filed by subcontractors. Work at several construction sites pauses.

Fitch, Moodys, S&P downgrade Evergrande’s outlook to negative.

September 2021 Evergrande says it is under tremendous pressure and may not be able to meet its liabilities. The developer misses two offshore bond payments.

Patrick writes "Yesterday somebody asked what [Evergrande's] assets were compared to the CNY 1.97t of liabilities. Refinitiv says they were 2.3t at the end of 2020.
BUT, they have been selling some since then, and slashed apartment prices. Also the prices of other holdings such as the EV group have also plunged. 708 HK equity. That was HKD 280bn now just 70bn.
Overall, it seems pretty clear that the business has a negative net value, which will worsen on a default/restructure."

August 2025 Evergrande delists from the Hong Kong Stock Exchange.