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Business

Stocks and oil prices slump as Covid protests in China spook investors

Post By: November 28, 2022 0 Comment(s) , , , , , ,

Rare scenes of open dissent in China have spooked investors in the country causing a rout in Asian markets.

The unrest in China is the boldest show of public anger against the ruling Communist Party in years. 

It followed complaints that policies aimed at eradicating the coronavirus by isolating every case might have worsened the death toll in an apartment fire in Urumqi in the northwestern Xinjiang region.

The Hang Seng China Enterprises Index declined more than 2pc in afternoon trading, with tech and property shares leading the decline. 

The onshore yuan weakened 0.6pc against the dollar. 

5 things to start your day 

1) Banks accused of charging thousands of pounds extra on mortgage payments – Customers still paying much higher interest than before mini-Budget, even though markets have recovered

2) The battle to build Europe’s next generation fighter jet – Questions remain over dualing fighter programs as Europe slides into recession

3) Traders brace for fresh stock market falls as protests grip China – Unrest expected to hit Chinese share prices when trading starts in Asia

4) British Airways to double operations at Gatwick Airport – Airline plans to increase planes based at Sussex site from 14 to as many as 28

5) Hopes rise for Christmas post as union offers last ditch talks with Royal Mail to avoid strikes – The Communication Workers Union proposed ‘intensive negotiations’ after rejecting Royal Mail’s latest pay deal

What happened overnight 

Stocks and commodities prices slid sharply overnight as the rare protests in major Chinese cities against the country’s strict zero-Covid restrictions raised investors’ concerns about the growth implications for the world’s second-largest economy.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.5pc having slumped 2.2pc at the open, pulled lower by a selldown in Chinese markets.

Hong Kong’s Hang Seng Index shed 4.16pc at the start of trade but recovered some territory to be off 2.32pc. China’s CSI300 Index was down 1.8pc after opening down 2.2pc while the yuan also retreated.

“Clearly the harsh China lock downs have been impacting their consumer and business sentiment for some time and the persistent downgrades to China GDP have been consistent for well over a year now with further downgrades to come,” said George Boubouras, executive direct of K2 Asset Management in Melbourne.

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UK property demand down 44% since market-rocking mini budget: Zoopla

Post By: November 28, 2022 0 Comment(s) , , , ,

Estate agents “Sold” and “For Sale” signs outside residential properties in the Maida Vale district of London, UK, on Thursday, June 30, 2022.

Bloomberg | Bloomberg | Getty Images

Demand for U.K. residential properties has nearly halved following September’s government budget that spooked financial markets and toppled the prime minister, research Monday showed.

The fiscal package, announced Sept. 23, caused a sell-off in bonds and led to predictions of a potential housing market crash as interest rate expectations rose sharply. In the wake of the budget, a record number of mortgage deals were pulled and many lenders paused offerings as they assessed the volatility.

Buyer demand fell 44% year-on-year in the four weeks to Nov. 20, according to property website Zoopla, while new property sales declined 28%. The stock of homes for sale was up 40% over the same period.

Zoopla said demand had fallen to levels usually seen over Christmas — among the quietest time for property markets — as buyers waited to assess the outlook for mortgages, along with their own jobs and wages.

Richard Donnell, Zoopla’s executive director for research, said the company expected house price falls of up to 5% in 2023.

“But the number of sales going through will remain buoyant for a range of structural, demographic and economic factors,” he said, including ongoing housing scarcity, with the average number of homes on offer per estate agency still a fifth lower than before the pandemic.

Although a fall in house prices is widely predicted, the company’s predictions are less bearish than others.

Economists at Pantheon Macroeconomics forecast a decline of 8% over the next year, while Nationwide, one of the U.K.’s largest mortgage providers, said earlier this month that house prices could collapse by up to 30% in its worst-case scenario.

In contrast, the U.K.’s Office for Budget Responsibility has said it expects house prices to drop 1.2% next year and by 5.7% in 2024.

It comes after a desire for different kinds of property during the pandemic, the suspension of a purchase tax on homes under $500,000 from July 2020 to July 2021 and ongoing supply shortages saw house prices rocket to record highs.

Zoopla said there was currently a “widespread” repricing of homes occurring, but that it was modest in size. It puts U.K. house price growth at 7.8% year-on-year.

Its report described market trends as a “shake-out rather than a pre-cursor to a housing crash” and said the mini budget had “delivered a shock” to sellers and buyers.

“All the leading supply and demand indicators we measure continue to point to a rapid slowdown from very strong market conditions. We do not see any evidence of forced sales or the need for a large, double digit reset in U.K. house prices in 2023,” its report said.

Meanwhile, private rental costs in Britain have risen to record highs amid intense competition for properties, according to separate data published by the website Rightmove last month.

It found rents in London were up 16.1% year-on-year, the highest growth of any region on record.

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Africa: Land Reform in South Africa - 5 Myths About Farming Debunked

Post By: November 26, 2022 0 Comment(s) , , , , , , , , , ,

South Africa’s land reform policy remains highly contested. But, in our view, a number of persistent myths about farmland statistics and the structure of commercial agriculture skew debates. This makes it difficult to reach some common understanding about the realities of land and agriculture in the country.

In 1994 when South Africa became a democracy, white farmers owned 77.580 million hectares of farmland out of the total surface area of 122 million hectares. The new government set a target of redistributing 30% of this within five years. This target date has been moved several times and is now 2030.

According to popular belief between 8% and 10% has been redistributed so far. But as we show below this is incorrect as it omits a number of key statistics.

Only 17%-20% of the 77,58 million ha is suitable for field crop, irrigation and horticultural production. More than 55% of farmland is only ideal for extensive grazing (land that is poor and dry but animals can roam widely, the Karoo being an example), and another 20% for intensive pastures and animal production (land, the KwaZulu-Natal Midlands being an example, that receives good rains and has good pastures for grazing).

This shows that the potential of farm land being used to create full-time sustainable livelihoods is limited. This suggests that a careful and measured approach needs to be adopted in redistribution efforts.

These realities are the basis for our arguments against five standard myths about agriculture and land in South Africa. That’s not to say that there isn’t a great deal still to be done. But failure to recognise the gains that have been achieved means that policies can’t be developed based on what’s been achieved so far.

Myth 1: 40,000 white farmers own 80% of all South Africa’s land

First, let’s turn to the number that’s quoted about white farmers.

The number of 40,122 commercial farmers is widely quoted as the total number of farmers earning a commercial income from farming. The number comes from the 2017 census of commercial agriculture.

But the number is flawed.

Firstly, the census only considers farmers who are registered for VAT (for which the the threshold is a turnover of R1 million a year (about US$59 000 today).

Adding in two other groups – the number of households involved in commercial farming as their main source of income and those that practice farming as a secondary source of income – the total number of households comes to 242,221.

It’s difficult to estimate the “race” of commercial farmers. But, using different data sources including the 2011 population census, the 2017 agricultural census and the 2016 community survey we estimated that most commercial farm enterprises are black owned. And that only 18% of these households are white.

Now to the 80% figure.

In 1994 white farmers owned 77.58 million ha of freehold land. We estimate that white farmers now own 61 million ha of freehold farmland. This follows the implementation of redistribution and restitution programmes and other transfers of land to the state and black farmers. It still represents 78% of freehold farmland but covers only 50% of the total surface area of South Africa.

Fact: white commercial farmers (around 44,000 farming units) own 61 million ha – 78% of the farmland that comes with private title deeds or 50% of all land in South Africa.

Myth 2: Commercial agriculture is characterised by large-scale white farmers

This myth results from a misinterpretation of the concept of “commercial” and “scale”.

Commercial agricultural production indicates production beyond subsistence needs, with some (or a major share) of the total production sold to the market. This usually also involves the purchase of production inputs such as seeds and fertiliser.

But commercial production happens at various levels or “scales of production”.

The scale of farming is not determined by land size. Instead it refers to the gross farm income (or turnover) of the farming enterprise.

Land size is not a good indication of the scale of the farming operation. For example, a small irrigation farm of 10 ha can deliver millions in turnover while a 10,000 ha extensive grazing farm is unlikely to exceed R1 million in turnover per annum.

If we unpack the census of commercial agriculture, commercial farming in South Africa consists largely of small-scale family-based operations. Almost 90% of all VAT-registered commercial farming businesses can be classified as micro – or small-scale enterprises (turnover below R13.5 million). While this is true, it’s also a fact that there are just over 2,600 large farms with turnover on average above R22.5 million per annum. These farms are responsible for 67% of all farm income and employ more than half the agricultural labour force.

If we take account of the farms that are not registered for VAT it is evident that 98% of all farming operations in South Africa are small-scale operations.

But, a mistaken leap is made to say that all white commercial farmers are “large-scale” operations, and all black farmers are “small-scale”. In the process, most writers on South African agriculture confuse the “scale of the operation” with the “race” of the operator.

Fact: most white commercial farmers in South Africa are small-scale and family-based operations. Only a small minority (2 600) are large-scale operations. Most of these are owned by white farmers.

Myth 3: Commercial farmers are hoarding land and not selling any farms

It is often argued that white commercial farmers are holding on to their land and not offering it for sale to potential buyers.

Deeds office records provide insights into the activity in the farmland market. Between 2013 and 2021, the annual number of farm transactions recorded varied between 2,000 and 4,000. In 2021 2,585 farms were sold and registered to new owners. Most (58%) of these were farms smaller than 300 hectares.

Between 2003 and August 2022, the state acquired 2.8 million ha which brings the total area of farm land acquired by the state since 1994 to 3,12 million ha (or 4% of freehold farmland). This suggests that the state is also active in the market.

Fact: The farmland market is active with around 2% of total farmland with private title deeds traded annually.

Myth 4: All black farmers with private title deeds acquired their land through the land reform programme

Deeds records show that since 1994 black South Africans have privately acquired a total of 1.78 million ha of farmland through normal self-financed market transactions.

Over the same period the government redistribution programme has assisted beneficiaries to acquire a total of 7.2 million ha of farmland. Thus, for every four hectares transferred by the State to black South Africans, private transactions contributed another one hectare to the process.

Fact: Black farmers have acquired almost 2 million ha of farmland (2,3% of total freehold farmland) on their own without any assistance from the state sponsored land redistribution programme.