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SINGAPORE – Failure to contain Covid infections is hindering the recovery of many Southeast Asian economies, says Jefferies’ Sean Darby.

“Indonesia, like many of the ASEAN economies, has not really gotten the Covid-19 virus under control,” Darby, global head of equity strategy for the US investment bank, told CNBC’s “Squawk Box Asia” on Tuesday.

“That seems to be the Achilles’ heel for the ASEAN economies at the moment,” he said, referring to the regional grouping of the Association of Southeast Asian Nations.

Goldman Sachs recently trimmed its 2021 growth projections for major economies in Southeast Asia, as a surge in the more contagious Delta variant in recent weeks set daily record highs in infections in Indonesia, Malaysia and Thailand.

Indonesia’s creditworthiness under pressure

The regional surge in infections has also challenged the creditworthiness of Southeast Asian economies.

Moody’s Investors Service warned Monday that resurgent Covid infections in Indonesia could undermine the country’s creditworthiness.

“A resurgence of more infectious mutations in the virus poses significant risks to Indonesia’s economic recovery,” Moody’s said in the report. It will also “challenge the government’s plans to reduce the budget deficit to pre-pandemic levels, a credit negative.”

S&P Global Ratings made similar comments days earlier, warning in a July 15 report that Indonesia’s “existing credit buffers on ratings will be removed if persistent lockdowns are extended.”

On Tuesday, Indonesia’s President Joko Widodo announced an extension of the pandemic-related restrictions, which should end on July 25, Reuters reported.

Unfortunately, given the poor vaccine adoption, the potential for Indonesia to reach pre-pandemic levels is likely to be pretty slim right now.

Darby said Indonesia’s situation needs to be put in context: the country’s balance of payments is “actually very good,” he said, adding that its foreign exchange reserves are near record highs. In addition, the Indonesian economy is experiencing “quite a decent manufacturing revival”.

Still, he admitted that controlling Covid will likely prevent Indonesia from reaching its full economic potential. The country is lagging behind in its vaccination efforts worldwide – according to Our World in Data, only 5.95% of the Indonesian population were fully vaccinated as of July 18.

“The reality is that … you probably won’t reach your full economic potential until you have some kind of herd immunity,” Darby said. “Unfortunately, given the poor vaccine adoption, the potential for Indonesia to reach pre-pandemic levels is likely to be pretty slim right now.”

Chipotle Mexican Grill reported quarterly sales in excess of pre-pandemic levels as customers returned to its restaurants for dinner on Tuesday.

The company also released a third quarter revenue forecast.

Shares rose 4% in extended trading.

Here’s what the company said, relative to Wall Street expectations, based on an analyst survey by Refinitiv:

• Earnings per share: $ 7.46 adjusted versus $ 6.52 expected
• Revenue: $ 1.89 billion versus an expected $ 1.88 billion

Chipotle reported net income of $ 188 million, or $ 6.60 per share, for the second quarter, compared to $ 8.2 million, or 29 cents per share, last year. Food and beverage costs were down almost 3% year over year due to menu price increases and lower beef prices.

With no disruption to restaurant facilities, shutdown costs, and other items, the burrito chain earned $ 7.46 per share, beating the $ 6.52 per share analysts surveyed by Refinitiv had expected.

Net sales rose 38.7 percent to $ 1.89 billion, beating expectations of $ 1.88 billion. Sales in the same store increased by 31.2%. A year ago, the company’s sales in the same store fell more than 9% after the lockdown hurt demand.

After online orders skyrocketed last year, Chipotle saw slow growth for this part of its business. Digital sales grew 10.5%, accounting for 48.5% of the company’s quarterly sales. In the first quarter, Chipotle’s online orders overtook in-person sales for the first time.

“I expect the percentage will likely drop a little when the dining rooms return,” said CEO Brian Niccol on Tuesday at CNBC’s Closing Bell. “What I’m watching are the absolute dollars we make in our digital business.”

The popularity of Chipotle’s all-digital quesadillas, which launched in March, helped boost online sales. Niccol said that every tenth transaction involves a quesadilla order.

Niccol said dining room sales are about 70% of 2019 levels while the company is holding about 80% of the gains in its digital orders. He also said customers are returning for lunch.

Chipotle opened 56 new locations and closed five restaurants in the quarter. Forty-five of the new restaurants have “chipotlanes,” as the company calls its drive-thru lanes, which are only intended for digital pickup of orders. Executives said restaurants with chipolanes see 20% higher sales when they open compared to locations without a drive-thru lane.

Looking to the third quarter, assuming current trends continue, the company forecasts low to mid double-digit sales growth in the same business. In the third quarter of 2020, sales in the same store rose 8.3%. Niccol said the Delta Covid variant has not yet affected consumer behavior.

CFO Jack Hartung told analysts that the company is forecasting higher food costs in the next quarter due to higher beef and freight prices, as well as staff shortages at its suppliers.

“In the next few quarters, we will have more transparency about how much of this inflation is permanent or temporary, and we can take the appropriate steps, if necessary, to offset the permanent impact,” he said.

Intensive-care unit and lung doctor Dr. Vin Gupta told CNBC that he’s already encouraging patients who received the single-shot Johnson & Johnson Covid vaccine to get a Pfizer or Moderna booster shot amid the dramatic increase in delta variant cases across the U.S. 

Gupta, a professor at the University of Washington’s Institute for Health Metrics and Evaluation, told “The News with Shepard Smith” that “AstraZeneca, when combined with a Pfizer or Moderna booster, is showing tremendous levels of protection against delta, in terms of the antibody levels that are generated in patients.”

“I do think that those one-shot J&Jer’s should be given the opportunity, while we complete our clinical trial … I’m already telling my patients to do it, if they can get access to it.” 

Gupta’s comments come on the heels of a new study from a lab at New York University Tuesday that raises serious questions about the effectiveness of J&J’s single-dose vaccine against the highly contagious delta variant. The NYU study is not yet peer reviewed, but found that the antibody levels in those who received the J&J shot may be low enough to be less protective.

CNBC correspondent Meg Tirrell interviewed the lead author of the study, Dr. Ned Landau, who told her that the study suggests, “one should at least consider a second vaccination, a second shot” with the J&J vaccine, either of the same vaccine, or one from Pfizer or Moderna.

J&J told CNBC that its own data showed the vaccine “generated strong, persistent activity against the delta variant and other highly prevalent variants.” 

The Centers for Disease Control and Prevention told CNBC that it stands by its statement earlier this month about boosters that “Americans who have been fully vaccinated do not need a booster at this time.” 

Gupta furthered the case for administering a booster shot when he told host Shepard Smith that his “definition of fully vaccinated is two doses of a vaccine.”

Smith asked for clarification on whether Gupta considers the nearly 13 million Americans who received the J&J dose were actually fully vaccinated. 

“I think you’re protected, likely from the hospital and severe outcomes from say, the delta variant, based on what data we do have,” Gupta said. “I do not think you have the same level of protection to transmit the virus than somebody who received two doses of the vaccine like Pfizer or Moderna. I think that is pretty clear at this point.”

Senator Ron Wyden, D-Ore., Speaks during a hearing on the Senate Finance Committee’s nomination for Nominee Deputy Treasury Secretary Adewale Adeyemo on February 23, 2021.

Greg Nash | Swimming pool | Reuters

Senate finance committee chairman Ron Wyden, D-Ore., Released a bill on Tuesday to revise a controversial corporate deduction that was part of the 2017 Republicans’ sweeping tax legislation.

Currently, what is known as the Qualified Operating Income Deduction, also known as 199A, allows certain businesses, such as sole proprietorships, partnerships, and S corporations to write off up to 20% of net income.

The bill would progressively abolish tax breaks for households earning more than $ 400,000 a year and deliver on President Joe Biden’s election promise, Wyden told reporters in a phone call.

At the same time, the proposal also expands the eligibility for depreciation by removing “extremely arbitrary restrictions” on which industries qualify, he said.

More from Personal Finance:
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In 2021, individuals earning less than $ 164,900 or married couples filing together who earn less than $ 329,800 may be eligible for the full 20% deduction.

However, households earning above these thresholds can only claim part of the deduction and some types of businesses forfeit their eligibility altogether.

For example, so-called service professions or companies – which include health, law, financial services and more – do not qualify above certain income levels.

Wyden’s exit starts at over $ 400,000, eliminating the $ 500,000 deduction entirely.

Here is an opportunity to generate significant income while not raising taxes for small businesses on Main Street.

Senator Ron Wyden

Chairman of the Senate Finance Committee

“There is an opportunity here to generate significant income while not raising taxes for small businesses on Main Street,” said Wyden.

The proposal comes as Democrats continue to seek to pay for priorities like education, health insurance, childcare, paid vacation, green energy, and more.

President Joe Biden is open to new ideas on how taxes can be increased on the rich as long as it doesn’t affect those on less than $ 400,000, according to a White House official.

Who will benefit from the deduction

Although U.S. pass-through businesses include small and large companies, Wyden pointed out that the tax break could benefit wealthy Americans disproportionately.

“Half of the money won goes to millionaires, and because the upside is so upside down, many of the small business owners on Main Street have actually been foreclosed,” he said.

Households with higher incomes receive a larger share of the passed through business tax break than the middle class, according to a report by the Center on Budget and Policy Priorities.

In addition, according to a report by the Joint Tax Committee, 61% of benefits could go to the top 1% of families by 2024.

Although some small business groups support the bill, others as well as Republican lawmakers can oppose the bill.

“Sen. Wyden’s proposal to limit small business withholding and raise small business taxes is the wrong plan at the wrong time,” said Kevin Kuhlman, vice president of government relations for the National Federation of Independent Businesses in Nashville.

A reduction in the qualified income withholding would directly affect the ability of small businesses to hire people, invest in their businesses, increase compensation and threaten the fragile economic recovery, he said.

The current deduction will expire after 2025 without an extension by Congress.