Global news headlines are once again filled with statistics of record-breaking Covid-19 cases. And that includes in countries such as Australia, where previous outbreaks were among the best contained in the world. The country reported a whopping 111,907 new cases on Jan 8 — compared with only 11 this time last year and 1,654 just a month back. Globally, more than two million new cases are being detected each day — and that is most certainly undercounted — owing to the extremely contagious nature of the Omicron variant.
In the US, new cases have topped 700,000 daily for the past seven days, on average. Thousands of flights are being cancelled, elective surgeries are being delayed, some schools are closing in-person learning and many emergency services as well as private businesses are operating below optimal capacity. Once again, we are witnessing huge disruptions affecting both public healthcare systems and across economic sectors — but with one very important difference. A huge majority of the infected — and particularly those who are vaccinated — are asymptomatic or suffering only mild symptoms. In fact, anecdotal evidence suggests up to half of admissions at some hospitals are due to issues unrelated to Covid-19, where a positive test result is merely incidental. The disruptions are caused by people calling in sick and/or under home quarantine for close contact — not because they are hospitalised and/or severely ill.
So far, the SARS-CoV-2 coronavirus has evolved largely along the expected path. Each major iteration has proven to be more infectious than the ones before but the severity of the resulting illness — as reflected by the percentage of positive cases that are hospitalised — is decreasing.
As we explained before, all living beings continuously evolve to better adapt to their ever-changing environment in order to propagate. It is to the advantage of the virus to not kill its host. We think, to outcompete the already very infectious Delta and become the dominant variant in the world, Omicron evolved into an “upper airway specialist” that is also better at evading antibodies, which prevent the initial infection. But by doing so, current studies suggest that it traded for rapid growth in the nose, throat and windpipe — where high viral load is easily spread — at the expense of growth in the lungs. It is the latter that results in severe illness like pneumonia and extreme breathing difficulties, requiring intubations. In other words, Omicron is extremely good at transmissibility but is less virulent.
Concurrently, humanity has been building immunity over the past two years, through vaccinations and previous infections, thereby becoming less and less susceptible to developing severe illnesses. Furthermore, various public health measures have been put in place (such as masking and physical distancing requirements), healthcare systems are more adept at managing and treating the sick and people have greater awareness of personal hygiene and the risks. Immunity and mitigation measures reduce the effective reproduction number, R — to below R0, which is the basic reproduction rate (transmissibility) without any intervention.
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Add all the above factors together and we have the predictable outcome that is unfolding today — indeed, similar to pandemics of the past — the percentage of susceptible population that can be severely affected by Covid-19 will decrease over time, even if the virus itself mutates to become more contagious. Thus, the inevitable conclusion — the pandemic will end and, we think, sooner rather than later.
We simplified the above into a hypothetical mathematical equation (Table 1) and Chart 1, to illustrate our argument. We are not epidemiologists and we do not pretend to be. But we know a little maths and as analysts, we are rational and logical, and importantly, less driven by emotions. Yes, some people have told us we are too opinionated. We will admit to this, and unapologetically so — after all, we are analysts.
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Clearly, we are no longer facing the same pandemic from two years ago. The virus has evolved and so have we. Humanity now has many more tools available to manage localised outbreaks and mitigate the fallout, including very promising treatments. As a result, headline Covid-19 numbers too must be read and interpreted from a different perspective.
For starters, the focus on and fixation with daily positive cases is misguided. It may be well meaning and yes, it is the conservative approach. Positive cases lead to higher hospitalisation and deaths. We also understand that keeping the public focused on rising positive case numbers will encourage vaccine take-up rates, which will in turn help lower transmissibility and mitigate the eventual (actual) impact. Yet, it is also a fact that the relationship between the number of deaths and positive cases has weakened over time and the fatality rate has fallen. Indeed, given the increasing number of people who are asymptomatic or have only mild symptoms, it is a certainty that cases are under-reported and undercounted — which means that the current fatality rate must be over-estimated.
Inevitably, mathematically, almost every one of us will come into contact with the coronavirus (whichever variant) at some point in time. As long as we are up to date with our vaccinations — some will have a degree of immunity from previous infections — the odds are that we will be fine, as will society as a whole. As we have proven above, the number of people suffering severe consequences will continue to fall with time.
Equally, the correlation between the length of lockdowns and economic hardship is completely predictable. The longer a lockdown is enforced, the greater the negative economic impact, with the number of people who will suffer rising and more jobs lost. Put another way, fewer and fewer livelihoods will remain unaffected — essentially the number of people who can afford a lockdown — as the length of time under stringent restrictions increases (see Chart 2).
Ultimately, it is about people’s lives — it is not just limited to lives that will be severely affected by the virus but also lives that will be severely affected by the resulting economic hardship of lockdowns, lives that will be unnecessarily affected or lost owing to delays in seeking medical treatment for other diseases, from social and mental stress, the longer-term impact on the young regarding education, and so on.
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We have said this before and we will say this again. Malaysia has one of the highest vaccination rates in the world today. Therefore, we must seek a better balance. It is time to reduce the fear factor, banish work hesitancy and fully embrace Covid-19 as endemic. Remember, each decision we make now involves a trade-off — between severe economic hardship and hospitalisation — and there are real consequences, whether they manifest today or in the future (see Chart 3).
We will have to live with Covid-19 but the pandemic will end. Things will, however, not return to the way they were pre-pandemic. We believe the Covid-19 pandemic is a game changer — in terms of the longerterm economic growth trajectory for all countries, for better and worst. It will inevitably lead to greater wealth disparity — among nations and citizens. This is why early recognition of the true cost and benefits, and the trade-offs, with regard to handling this pandemic and economic reopening is critical.
Much has been written about the inequity in availability of vaccines — with surplus supply in the rich developed world while vaccination rates still remain too low in poorer developing countries. Slow vaccination drives in the latter are compounded by weak public healthcare systems and many are grappling with logistics and distribution issues to get shots in arms. We have previously explained in detail how this disparity delays the recovery for developing countries and will have negative long-term impact on their economic development going forward.
It is likely that full reopening of borders will take some time yet, especially in poorer countries, where vaccination rates are low. When local populations are increasingly protected, with rising vaccination rates, the opening of borders will necessarily result in more imported cases — which translates into high negative exogenous cost to society.
That said, richer countries, we think, would likely reopen borders among themselves — because Covid-19 is better managed — to the exclusion of poorer countries. Keeping borders closed too long will be detrimental. It will also disproportionately hurt countries that are heavily reliant on a large (cheap) migrant labour force. They include Malaysia. This would, in turn, result in slower or stagnating economic growth.
We suspect the prevailing global labour shortage may remain unresolved for some time yet. But again, the magnitude of the impact will differ, between the rich and poor countries — and will further widen the divide. We will explain more of our thoughts on this in the next article.
The Global Portfolio gained 1.4% for the week ended Jan 12. Shares in Alibaba Group Holding recouped some lost ground from the recent heavy selloff, up 16.2%. Energy and financial stocks also did well as expectations of higher inflation and interest rates gained momentum. BP (+9.9%) and Wells Fargo & Co (+7.9%) were among the top gainers last week. The notable losers were Grab (-9.4%), Home Depot (-4.4%) and General Motors Co (-2.7%). Last week’s gains boosted total returns since inception to 66.2%. This portfolio is outperforming the benchmark MSCI World Net Return Index, which is up 63.7% over the same period.
*Tong Kooi Ong is related to Anthony Tan, co-founder and CEO of Grab
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Photo: Bloomberg
