A man walks past the Chinese and German national flags before a meeting of officials between the respective trade and economy ministries in Beijing, China, November 1, 2016. REUTERS/Thomas Peter/File Photo Acquire Licensing Rights
BERLIN, Sept 20 (Reuters) – German direct investment in China eased in the first half of the year albeit remaining close to its record high in 2022 and increasing as a share of the country’s overall investment abroad, according to official data analysed by the IW institute.
Investment in China dropped to 10.31 billion euros ($11.02 billion) in the first half of 2023 from 12 billion euros in the first half of last year, the IW said in an analysis shared exclusively with Reuters.
However, that was still nearly twice as much as the 5.5 billion euros invested in 2019, before the coronavirus pandemic hit. It was also more than twice the 4 billion euros invested on average in the first half of the year over the previous decade.
The data underscores concerns that German firms continue to invest heavily in China despite the government’s pleas for companies to reduce their exposure and its sharp cut in investment guarantees for the country.
Overall German direct investment flows dropped more sharply, to 63 billion euros from 104 billion euros last year, as Europe’s largest economy battled recession.
As a result, investment in China as a share of Germany’s overall investments actually increased to 16.4% in the first half from 11.6% last year and 5.1% in 2019, the IW said.
“The trend towards China remains mostly unchanged also this year,” said IW analyst Juergen Matthes. “Although the German economy is overall investing much less abroad, new direct investments in China remain nearly as high as before.”
Matthes pointed out that most of the investments in China were financed by re-invested profits.
Germany’s government has in recent months urged businesses to reduce their strategic dependencies on China given its view that Asia’s rising superpower is a growing threat to global security.
While there are early signs that German companies are beginning to rethink their China strategy, not least because of the economic slowdown there and new security laws, the data is still unclear.
Some China experts say that is partly due to a divergence between a handful of large companies like Volkswagen (VOWG_p.DE) and BASF (BASFn.DE) that are doubling down on their bet on the country, and the rest that are increasingly cautious and looking to diversify, including elsewhere in Asia.
Matthes pointed out that investments in the rest of Asia as a share of Germany’s overall investments was also rising.
“It is notable that nearly a quarter of German direct investment flows recently went to Asia,” he said.
($1 = 0.9354 euros)
Reporting by Sarah Marsh; Editing by Friederike Heine and Christina Fincher
Our Standards: The Thomson Reuters Trust Principles.
Tata Motors logos are pictured outside their flagship showroom in Mumbai May 28, 2013. REUTERS/Vivek Prakash/File Photo Acquire Licensing Rights
Sept 18 (Reuters) – Indian automaker Tata Motors (TAMO.NS) said on Monday it will raise the prices of its commercial vehicles by up to 3%, its third hike this calendar year to offset the residual impact of past input costs.
The price hike, effective Oct. 1, will be applicable across its range of commercial vehicles, the automaker added.
The company previously raised prices by 1.2% in January and by 5% in March to ensure its vehicles comply with the new emission norms.
India implemented stricter norms through phase II of Bharat Stage 6 from April 1, including testing real-time driving emissions, leading to increased costs for automakers.
Earlier in the day, ratings agency Fitch said in a report that India’s commercial vehicle sales volume will slow down to low-to-mid-single digits due to rising ownership costs.
The implementation of the latest emission norms will lead to nearly a 5% rise in prices of commercial vehicles from April 2023, Fitch added.
Reporting by Ashna Teresa Britto; Editing by Sohini Goswami
Our Standards: The Thomson Reuters Trust Principles.
Sept 18 (Reuters) – Growth in India’s commercial vehicle sales volume will slow down to low-to-mid-single digits due to rising ownership costs, Fitch Ratings said in a report on Monday.
The ratings agency said increasing regulatory requirements, elevated inflation and high interest rates have pushed up the ownership costs, thereby weighing on purchase decisions.
There was a 34% growth in commercial vehicle sales at nearly 962,000 units in the financial year 2023, up from the 569,000 units sold in fiscal year 2020, according to data from the Society of Indian Automobile Manufacturers (SIAM).
“The 3.3% Y/Y drop in commercial vehicle wholesale volume in the second quarter of FY23 marked the first yearly decline since March 2020,” Fitch said, adding that this was a result of the purchases made ahead of the price hikes by automakers and vehicle availability issues after the adoption of new emission norms.
The latest rules require the measurement of emissions in real time, leading to a near-5% rise in prices of commercial vehicles from April 2023.
“We expect faster volume for medium and heavy commercial vehicles than for light commercial vehicles, due to India’s rising infrastructure activities and the vulnerability of light commercial vehicles to potentially weaker rural demand due to uneven rainfall,” Fitch wrote in the report.
Reporting by Ashna Teresa Britto; Editing by Sohini Goswami
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BENGALURU, Sept 14 (Reuters) – Shares of realty-to-textile firm Bombay Dyeing and Manufacturing (BDYN.NS) jumped as much as 20% on Thursday on a $627 million deal to sell land, pushing up peers’ stocks on hopes of a pickup in the realty market.
The sale of the 22-acre land in Mumbai to a unit of Japan’s Sumitomo Realty and Development Co (8830.T) would help the company become debt-free, and comes as parent Wadia group faces troubles with its Go First airline filing for bankruptcy in May.
Bombay Dyeing’s stock hit its highest level since Sept. 27, 2018.
The deal, announced on Wednesday, signals investor optimism while the location of the land parcel presents immense development prospects, said Shishir Baijal, Chairman and Managing Director of Knight Frank India.
Shares of Godrej Properties (GODR.NS), Indiabulls Real Estate (INRL.NS) and Oberoi Realty (OEBO.NS) are up between 1.6% and 2.6%, driving the Nifty Realty index (.NIFTYREAL) up 1.6%.
Also helping sentiment was U.S. data showing a moderate increase in consumer prices in August, which cemented expectations that the Federal Reserve will leave interest rates unchanged in September.
The sale will help Bombay Dyeing record a pre-tax profit of more than 43 billion rupees ($518.24 million), and help “extinguish all its borrowings,” the Mumbai-based company noted in an exchange filing.
Bombay Dyeing shares were last up 15.9%. It has more than doubled so far this year, compared to a nearly 37% climb in the Nifty Realty index.
($1 = 82.9725 Indian rupees)
Reporting by Varun Vyas in Bengaluru; Editing by Mrigank Dhaniwala and Janane Venkatraman
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The company logo of construction company Redrow is pictured on a flag at a new housing development near Manchester northern England, April 7, 2016. REUTERS/Phil Noble/File Photo Acquire Licensing Rights
Sept 13 (Reuters) – Redrow (RDW.L) on Wednesday said it expected its profit to more than halve in fiscal 2024, after the British homebuilder posted a 4% decline in annual earnings that was ahead of estimates as the country’s housing sector battles a pronounced slowdown.
The latest warning from a British housebuilder comes as concerns about Britain’s economy and rising interest rates, which have pushed up mortgage borrowing and dampened buyer demand, have dented housebuilders’ profits and build targets.
Recent measures of Britain’s property market have shown house prices falling at the fastest pace since 2009, and a decline in mortgage loan demand.
Data from the Bank of England, which has raised interest rates 14 times since December 2021 in an effort to tame inflation, showed the value of residential mortgages in arrears jumped to the highest level in seven years in the three months to June.
“Whilst the market did partially recover in spring 2023, the further rise in mortgage rates combined with the cost of living crisis means the market remained subdued,” Chairman Richard Akers said in a statement.
Shares in the company slipped 1.7% in early trade.
“Redrow’s FY23 results provide a reassuring statement. The skew in completions and margins for the start of calendar of 2024 implies we may need to wait for the ‘turn’ in earnings reported, but perhaps that we are nearer the turn in expectation,” analysts at Jefferies wrote in a note.
The FTSE 250 firm forecast profit before tax in the range of 180 million pounds to 200 million pounds ($224.2 million to $249.1 million) for fiscal 2024.
The Wales-based builder, which constructs bigger houses than rival housebuilders and sells them to second or third-time movers, posted underlying profit before tax of 395 million pounds for the full-year ended July 2, compared with company-compiled analysts’ consensus estimates of 367 million pounds.
($1 = 0.8028 pounds)
Reporting by Aby Jose Koilparambil in Bengaluru and Suban Abdulla in London; Editing by Rashmi Aich and Christina Fincher
Our Standards: The Thomson Reuters Trust Principles.
A view of semi-detached homes in Tilbury, southeast England, May 12, 2014. REUTERS/Suzanne Plunkett/File Photo Acquire Licensing Rights
Sept 11 (Reuters) – British homebuilder Vistry (VTYV.L) said on Monday it will shift its entire focus onto its affordable homes business as a slowdown in the country’s broader housing sector intensifies.
Shares in the builder rose about 11% to a more than one-year high of 893 pence in early trade.
British housebuilders are increasingly feeling the pinch from the Bank of England’s 14 consecutive interest rate hikes, which have hit profit margins and demand as buyers cope with elevated mortgage costs and affordability concerns.
Industry gauges, from mortgage approvals to house prices, have fallen in recent months. Mortgage lender Halifax last week reported a 4.6% annual drop in house prices, the fastest pace since 2009.
Vistry has been working with local government authorities and housing associations to build affordable homes and this Partnerships division has outperformed its Housebuilding unit, which operates on similar lines to rival builders.
“The scale of the social need for affordable mixed tenure housing across the country continues to increase and it is clear that Vistry is uniquely positioned as the leader in partnerships housing,” CEO Greg Fitzgerald said in a statement.
The FTSE 250 (.FTMC) firm said it would merge its Partnerships business with the Housebuilding operations by the end of the 2023 fiscal year to focus on this “high-return, capital-light, resilient” affordable-housing model.
“The shift in strategy removes any doubt about Vistry’s mixed model. It focuses the group on a less volatile part of the
housing market where need is very high,” Peel Hunt analysts wrote.
Vistry had bolstered its Partnerships business with its 1.25 billion pounds ($1.56 billion) acquisition of rival Countryside last September.
The company said it would aim to return 1 billion pounds to shareholders over the next three years and intended to launch an initial share buyback programme worth up to 55 million pounds in November.
Vistry, one of the biggest British housebuilders in terms of the number of homes built each year, reported a drop of more than 8% in adjusted pretax profit to 174 million pounds for the six months ended June 30. It reiterated its forecast for annual pretax profit to exceed 450 million pounds.
($1 = 0.7994 pounds)
Reporting by Aby Jose Koilparambil in Bengaluru and Suban Abdulla in London; Editing by Rashmi Aich and Louise Heavens
Our Standards: The Thomson Reuters Trust Principles.
A company logo is seen on a banner outside a Barratt Homes housing development in Warrington, Britain, August 23, 2023. REUTERS/Phil Noble/File Photo Acquire Licensing Rights
Sept 6 (Reuters) – Britain’s largest homebuilder Barratt Developments (BDEV.L) flagged difficult trading conditions over the coming months after it posted a fall in annual profit on Wednesday, as high mortgage rates and a cost-of-living squeeze pummel demand.
Affordability concerns stoked by high mortgage rates and a prolonged cost-of-living crisis have weighed on the UK housing market, with indicators on everything from mortgage demand to construction rates and prices sliding in recent months.
Barratt said the UK housing market remained difficult and the outlook uncertain, adding that it expected average sales sites to reduce by around 6% in the current fiscal year.
The company said forward sales – a key industry metric which gauges housing demand – stood at 2.44 billion pounds ($3.07 billion) as of Aug. 27, down 36% from a year earlier.
The FTSE 100 (.FTSE) listed builder said its pre-tax profit was 884.3 million pounds for the year ended June 30, compared with a company-compiled analyst consensus of 882 million pounds.
British house prices in August were 5.3% lower than a year earlier, their biggest annual decline since July 2009, mortgage lender Nationwide said on Friday.
The number of house purchases in Britain this year is on course to drop by 21% to its lowest since 2012, property website Zoopla forecast last week.
“Whilst we expect that the backdrop will continue to be difficult over the coming months, we are a resilient business with a strong balance sheet,” CEO David Thomas said in a statement.
“We continue to expect a moderate recovery in FY25 and expect further recovery the following year with our new FY26 estimates,” analysts at Credit Suisse said after cutting their 2024 earnings-per-share estimate on weaker margins and higher expenses.
($1 = 0.7950 pounds)
Reporting by Aby Jose Koilparambil and Yadarisa Shabong in Bengaluru and Suban Abdulla in London; Editing by Subhranshu Sahu and Christopher Cushing
Our Standards: The Thomson Reuters Trust Principles.
A view of semi-detached homes in Tilbury, southeast England, May 12, 2014. REUTERS/Suzanne Plunkett/File photo Acquire Licensing Rights
Sept 5 (Reuters) – Investors in British housing stocks will be eager to glean insights on demand and selling prices as some of the country’s top homebuilders start issuing earnings reports or trading updates this month.
High mortgage rates and a prolonged cost-of-living squeeze have hammered UK housing demand over the past few months, making it the worst period for the industry since the 2008 global financial crisis, barring the lockdown-hit 2020.
Barratt (BDEV.L), the country’s largest housebuilder and a sector bellwether, will report annual results on Wednesday and is expected to brief the market on the sales trend and average selling prices in the first eight weeks of fiscal 2024.
“Forward sales guidance will be watched closely given the tricky economic environment,” Hargreaves equity analyst Matt Britzman wrote in a preview note.
“Investors will also be keen to see what’s happening with average selling prices. They were being pushed higher by an increased proportion of London completions,” Britzman said.
Berkeley (BKGH.L) will publish a trading update on Friday.
THE CONTEXT
Dwindling home-booking rates, tapering margins and uncertainty around interest rate hikes have forced housebuilders to slash profit forecasts and trim yearly housebuilding goals, amid desperate attempts to revive demand through a flurry of incentives.
British house prices in August were 5.3% lower than a year earlier, their biggest annual decline since July 2009, mortgage lender Nationwide said on Friday.
The number of house purchases in Britain this year is on course to drop by 21% to its lowest since 2012, property website Zoopla forecast on Wednesday.
Mid-cap builder Vistry (VTYV.L) will post half-yearly results on Sept. 11. Redrow (RDW.L) will report on Sept. 13.
FUNDAMENTALS
** Barratt expects annual profit to fall by a fifth, while house-build targets are seen falling 25% for the 2024 fiscal.
** Berkeley has guided to a 25% slump in annual volumes, but said it was confident of meeting its profit targets for the 2024 and 2025 fiscal years.
MARKET SENTIMENT
** Of the 19 analysts covering BDEV, 10 rate it “buy” or higher, 9 rate it hold; median price target of 495 pence
** Of the 18 analysts covering BKGH, 10 rate it “buy” or higher, four rate “hold” and four rate “sell”; median price target of 4,350 pence
Reporting by Aby Jose Koilparambil and Yadarisa Shabong in Bengaluru; Editing by Anil D’Silva
Our Standards: The Thomson Reuters Trust Principles.
BEIJING, Sept 1 (Reuters) – China stepped up measures to boost the country’s faltering economy on Friday, with top banks paving the way for further cuts in lending rates and sources saying Beijing plans further action including relaxing home-purchase restrictions.
As part of the support measures, Chinese authorities also reduced the amount of funds institutions need to hold in foreign exchange reserves. The measures cheered investors, and analysts said they should prevent a further downturn in the struggling property sector.
China is grappling with a slowdown that has rattled global markets, with the spotlight now firmly focused on troubled developer Country Garden’s (2007.HK) spiralling debt crisis in a sector that contributes to roughly a quarter of the economy.
As pressure mounts, the authorities have rolled out a series of measures to spur the economy and revive the property market, with steps including the easing of some borrowing rules and a cut to the amount of forex banks must hold as reserves.
The country is set to take further action including relaxing home-purchase restrictions, four people familiar with the matter said.
Regulators including the housing ministry, central bank and financial regulator in coming weeks will implement measures they have been working on over the past few months under State Council guidance, two of the people said.
ANZ’s senior China economist Betty Wang said several nation-wide property easing measures in the past couple of weeks have exceeded market expectations.
“This is the first time since 2021 that China has announced a series of nationwide property easing measures. They will help restore market confidence and prevent the sector from declining further.”
COUNTRY GARDEN TEST
In the near term, however, market sentiment will be swayed by the outcome of a crucial test of investor confidence in Country Garden.
On Thursday, Country Garden delayed a deadline for creditors to vote on whether to postpone payments for an onshore 3.9 billion yuan ($537 million) private bond until Friday 1400GMT to give bondholders “sufficient time” to prepare for the vote.
The vote is a key hurdle Country Garden faces as it strives to avoid default, with one holder of the developer’s dollar bonds saying if the company cannot extend its domestic debt, it will be unable to service external bondholders.
“This has been a slow-moving car crash,” said the bondholder, who declined to be identified due to the sensitivity of the issue, adding that concerns centred around uncertainty over the broader economy and tensions with Washington.
“Everything they do right now is going to have an impact five to 10 years down the line.”
Coins and banknotes of China’s yuan are seen in this illustration picture taken February 24, 2022. REUTERS/Florence Lo/Illustration/File Photo Acquire Licensing Rights
Country Garden, China’s largest private developer by sales, did not immediately respond to Reuters request for comment.
Stress in the property market has intensified pressure on Beijing to implement supporting measures and fanned concern about the ability of policymakers to arrest a decline in China’s broader economic growth.
China’s new home prices fell for the fourth month in August, according to a private survey on Friday, as the property debt crisis kept confidence at a low ebb despite the string support measures.
DEPOSIT RATES CUT
The central bank said on Friday it would cut the foreign exchange reserve requirement ratio (RRR) by 200 basis points (bps) to 4% from 6% beginning Sept. 15, a move seen aimed at slowing the pace of yuan declines.
The lenders lowering mortgage rates on Friday included Industrial and Commercial Bank of China (601398.SS), China Construction Bank Corp (601939.SS) and Agricultural Bank of China (601288.SS), which cut their deposit rates by between five and 25 basis points, websites from each bank showed. Several midsized banks also announced they will start cutting interest rates on a range of deposits by 10-25 basis points.
The measures helped lift confidence in the market and battered property stocks rallied, with China’s CSI 300 Real Estate Index (.CSI000952) up 2.4% in afternoon trade.
Three sources familiar with the matter told Reuters on Tuesday that major state banks would cut deposit rates as they prepare to lower interest rates on existing mortgages soon.
Starting from Sept. 25, first-time home buyers with mortgages can apply to their banks for a lower interest rate on their existing loans, China’s central bank and financial regulator announced on Thursday.
The deposit rate cuts are the third such cuts within a year, with the scale of cuts bigger than previous rounds in June and in September last year.
Lower deposit rates will partially offset various pressures on banks’ narrowing net interest margins – a key gauge of profitability, said Nicholas Zhu, a banking analyst at Moody’s.
“The impact of the deposit rate cut is material, given that close to three-quarters of Chinese banks’ liabilities are deposits,” Zhu said.
China’s mortgage loans totalled 38.6 trillion yuan ($5.29 trillion) at the end of June, representing 17% of banks’ total loan books.
($1 = 7.2633 Chinese yuan renminbi)
Reporting by Ziyi Tang, Ryan Woo and Wang Jing, additional reporting by Davide Barbuscia in New York; Editing by Anne Marie Roantree and Lincoln Feast
Our Standards: The Thomson Reuters Trust Principles.
SYDNEY, Sept 1 (Reuters) – Australia’s home prices rose in August for a sixth straight month as a jump in new listings was absorbed by strong demand, adding to signs that the recovery in the property market is becoming entrenched.
Data from property consultancy CoreLogic showed on Friday prices nationally rose 0.8% in August from July, accelerating from a rise of 0.7% in the earlier month. Since finding a floor in February, national prices have risen 4.9%, following a 9.1% decline from their peak in April last year.
The recovery has been led by Sydney and Brisbane where prices jumped 1.1% and 1.5% respectively.
Regional markets, where there is usually less demand from overseas migration, eked out a gain of 0.1% in August, while the housing values in capital cities across states and territories rose 1%.
The Reserve Bank of Australia (RBA) has jacked up interest rates by a whopping 400 basis points since May last year to tame inflation, but housing prices found a bottom earlier than expected due to short supply and surging migration levels.
Markets are wagering the tightening cycle might now be over, with another hike priced at only a 40% chance. That expectation has also underpinned gains in the property market.
CoreLogic research director Tim Lawless attributed the gains to lower-than-average advertised supply levels.
“The balance between advertised supply and demonstrated demand will be a key factor influencing housing market outcomes in spring,” said Lawless. “A rise in fresh supply without a commensurate lift in purchasing activity would likely take some heat out of the pace of capital gains.”
There are also signs that rents, which have risen for a 36th consecutive month and added to inflation, may be peaking. National rents rose 0.5% in August, the smallest gain since November 2020, according to CoreLogic.
Reporting by Stella Qiu; Editing by Lincoln Feast.
Our Standards: The Thomson Reuters Trust Principles.