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JP Morgan: The Sydney Lockdown
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The Sydney Lockdown Might Drag on Economic Activity

Sun Sep 05 2021 08:19
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Sydney is an important city in JP Morgan expansion strategy in Australia and New Zealand. The recent lockdown directly affected over 2 million people, denting its economic activity in the region, especially its financial markets

Productivity will go down as the lockdown impacts kick in, affecting the already crawling economy. With Australian authorities contemplating extending the lockdown, expansion in the region stares at uncertainties. 

Although not directly linked to JP Morgan's economic activities, oil exploration will surfer a severe backlash. The sector depends on the company's financial muscle to power the small industries within the region. As the lockdown continues to slow down the city's economic activity, the recovery process widens further. 

XOsignals seeks to determine the lockdown's effect on oil production and distribution, and how it affects the firm's economic prospects. 
Effects of the Lockdown on JP Morgan's Core Mandate in Sydney and the Entire Asia Pacific Region

Workforce Unpreparedness after the Lockdown

As a financial institution, JP Morgan provides expertise and financial support to companies within the region. The Sydney lockdown limits movement, leading to a partial or total shutdown of companies in the city and the region. 

Besides, the pandemic affects the workforce productivity since it is communicable and affect their well-being. 

With no or limited workforce readiness, the region's economic prospects hang in the balance. By extension, it affects the demand for oil products in the city and the entire region. The Sydney lockdown has the following effects on workforce readiness:
  • • A good number of decision-makers in the industry are vulnerable to coronavirus. It will slow down the recovery process as the workforce might not be ready when the time comes.
  • • The lockdown diverts funds to health-related projects and enforcement. When the authorities lift the lockdown, there will be limited or no funds to return companies to their optimum capacities.
  • • With limited funds for economic activities, the demand for oil products will go down significantly, leading to a capital-labour crisis. It might also dent JP Morgan's capital reserves since they invest in viable projects with favourable returns in the short and long term.

Limited Small Business Development

JP Morgan is big on small and medium-sized companies. They help them with research, finance and expertise in their respective fields. The company has a soft spot for manufacturing and any other company that employs many people. 

With the lockdown impacts biting hard, such companies operate at the minimum or are totally shut down. Such effects eat into the core mandate of the businesses, reducing their productivity.

Small businesses need oil products to power their machines and coordinate their logistics departments. Despite the lockdown enforcement, the health department continues to record more coronavirus cases. 

Such development might lead to more restricted movements, which will affect operations. In essence, it means that the firm's expertise and resources will be of no use, which leads to a loss in revenue.

Limited Financial Investment Capability

The basis of economic growth is investments and trade. Venture capitalists and financial firms invest in ideas and products that can bring back returns so that they can recoup their funds. 

However, the Sydney Lockdown reduces investment opportunities and transactions. The company might have money for investments, but the lack of investment opportunities reduces its projected revenues. Since the coronavirus is not going anywhere in the foreseeable future, they must look for alternative ways to invest.

Moreover, JP Morgan is not only involved in corporate investment but also in government institutions. Unfortunately, the regional and national governments' focus is on medical facilities. It limits its involvement in other sectors, which scales down its economic activity and expansion goals.  

The company is big on the following:
  • • Corporate Financing - the company prioritise marginalised people and help them set up businesses. They also facilitate job creation in the community as a way to spur economic growth. The effect of such ventures is significant and cuts across all sectors, including the energy sector. All this goes away with the lockdown.
  • • Philanthropy - The JP has a long history of improving social amenities in disadvantaged communities in Australia, dating back to the 1870s. In conjunction with the regional and national governments in Australia, they help in improving living standards. The onset of coronavirus scale down their communal engagement, which disrupted the economic activity in these regions.

The Effects of the Lockdown on the Oil and Gas Sector

Low Demand

There is less market activity in the global oil and gas market with no companies to purchase oil products. It destabilises complementary factors such as capacity and oil pricing. 

Overproduction

Low demand comes with overproduction. No company wants oil products since they do not need them. It begets storage problems and leads to scale down of the oil exploration activities. 

Low Prices

Since no one wants oil, the demand drastically reduces. To stay afloat, the oil exploration companies sell their products at throw-away prices. Most oil-producing countries belong to OPEC, which regulates oil production and distribution. In such circumstances, they step in to ensure that their members do not run into losses.

Reduced Customer Base

Some companies might not survive the pandemic purge and can die in the process. Such unfortunate occurrences reduce the number of customers for oil products. The lockdown impacts also cause the spiral effect since the workers in the defunct company rely on oil and gas products to power their households. 

Conclusion

Sydney's economy depends on the well-being of its companies. They employ the population, increasing the money supply in the economy. Coronavirus pandemic has restricted movement and slowed down the participation of the people in the economy. 

The oil and gas sector is the worst hit since the consumption of its products, especially for commercial use, is at its lowest. Even with resources, venture capital companies and their abilities cannot commit since the future is uncertain. They have to wait until the authorities lift the lockdown for them to access the damage and re-plan.

XOsignals will be on standby to provide the information as it unveils. We are the go-to trading signal provider, with insightful information on the economy's well-being, especially during these trying times. 

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