If you didn’t see, the Fed enlarged the eligibility of companies that can tap into its Main Street Loan Program. From no more than 10,000 employees and up to $2.5b of revenue, a company with 15,000 employees and revenue up to $5b now has access. Also, the minimum loan size will be $500k from $1mm when first proposed. And, the debt to EBITDA ratio could be as high as 6x. As I said earlier this week, good luck Fed in measuring EBITDA but we can assume in the current economic environment they will be not that strict with compliance. It will be really interesting on how this program plays out. To incentivize skin in the game, the Fed is requiring banks to hold up to 15% of a company loan on the hopes that the skin will result in good loans. But, if it was such a good loan, why would the bank off load the balance to the Fed? We can only imagine what the quality of the Fed’s balance sheet will look like when all is said and done.
South Korea’s trade data was poor as expected. Exports fell 24.3% y/o/y, a touch more than the estimate of a 23% decline. Imports were lower by 15.9% vs the forecast of a 14% drop. Any of us could have written this but the economy ministry said “Demand in export markets has plunged amid lockdowns and plant shutdowns in the US and Europe, while China’s economic recovery continues to be protracted. This triggered a decline in exports across the board.” There was particular weakness in auto’s and auto parts and also smartphone exports which fell 43.6% y/o/y. Bottom line, measuring the pace of growth after the world reopens again is much more relevant than measuring the stats while it’s still partially closed. The Kospi was closed along with almost every other Asian and Europe market due to May Day.
Ahead of the US manufacturing data today for April, we got some final revisions to some others. Australia’s manufacturing PMI was revised to 44.1 from 45.6 initially and down from 49.7 in March. Japan’s manufacturing index was changed to 41.9 from 43.7 in the first print and that is down from 44.8 in March and 47.8 in February. In the UK, its manufacturing PMI was lowered to 32.6 from 32.9 initially and that is down from 47.8 in March and 51.7 in February.