A Wall Street sign is pictured outside the New York Stock Exchange in New York, October 28, 2013. REUTERS/Carlo Allegri/File Photo Acquire Licensing Rights
Sept 22 (Reuters) – Shares in real estate companies fell on Friday, adding to a massive sell-off the previous day, when bond yields jumped to their highest levels in 16 years after the Federal Reserve signaled that U.S. interest rates would stay high for longer.
The S&P 500 real estate index (.SPLRCR) lost 0.7% on Friday after falling 3.5% on Thursday, which was its biggest daily decline since March when the banking sector was in crisis.
The U.S. Treasury 10-year yield , fell slightly on Friday, after rising on Thursday to around 4.5%, its highest since 2007. This provided tempting returns for fixed-income assets, making the relatively high dividend payouts of Real Estate Investment Trusts (REITs) a little less tempting.
REITs also tend to borrow heavily so the prospect of higher rates for longer puts pressure on their profit outlook. While the Fed decided not to hike interest rates after its meeting on Wednesday, it indicated that rates could stay at elevated levels for longer than investors had expected.
“Not only are REIT’s bond substitutes but they also rely on borrowing so that just makes them doubly interest-rate-sensitive,” said Jack Ablin, chief investment officer of Cresset Capital who says that even though the sector seems cheap by some measures, he is not ready to step in right now.
The S&P 500 real estate index is the second weakest performer among the benchmark S&P 500’s 11 major sectors with a decline 6.5% so far this year, second only to utilities’ (.SPLRCU) 10.3% drop. This compares with year-to-date a gain of about 15% for the benchmark index.
But Gina Szymanksi, portfolio manager for REITs at AEW Capital Management, said she expects Treasury yields will peak around current levels, which will help REIT stocks that have “already baked in” 10-year Treasury yields in this range.
“The knee-jerk reaction is, as interest rates rise, you sell REITs. It’s not totally unrealistic. They are capital intensive businesses that require financing,” said Szymanski, adding that if 10-year yields rise sharply from here it would add pressure to REIT stocks.
But if the economy weakens, REITs often outperform.
“When the Fed tries to slow the economy, it’s usually successful. That usually results in declining earnings for companies in general and when that happens it’s the time for REITs to shine,” says Szymanksi who estimates a roughly 20% total return for real estate stocks in the next two years.
On Friday the biggest real estate loser was American Tower (AMT.N), which finished down 1.8% while the biggest gainer was Extra Space Storage (EXR.N), up 1.2%.
Alexandria Real Estate Equities (ARE.N) fell 1.6% on Friday, after losing 8% on Thursday and hitting its lowest level since 2016.
Reporting By Sinéad Carew, editing by Lance Tupper and David Gregorio
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LITTLETON, Colorado, Sept 19 (Reuters) – The deepening debt crisis in China’s construction sector – a key engine of economic growth, investment and employment – may trigger an unexpected climate benefit in the form of reduced emissions from the cement industry.
Cement output and construction are closely correlated, and as China is by far the world’s largest construction market it is also the top cement producer, churning out roughly 2 billion tonnes a year, or over half the world’s total, data from the World Cement Association shows.
The heavy use of coal-fired kilns during manufacturing makes the production of cement a dirty business. China’s cement sector discharged 853 million tonnes of carbon dioxide in 2021, according to the Global Carbon Atlas, nearly six times more than the next largest cement producer, India.
The cement sector accounts for roughly 12% of China’s total carbon emissions, according to Fidelity International, and along with steel is one of the largest greenhouse gas emitters.
But with the property sector grinding to a halt due to spiralling debt worries among major developers, the output and use of cement are likely to contract over the next few months, with commensurate implications for emissions.
HOUSING SLUMP
The property markets account for roughly a quarter of China’s economy, and for years Beijing has used the sector’s substantial heft to influence the direction of the rest of the economy by spurring lending to would-be home buyers and fostering large scale construction projects.
But the big property developers racked up record debt loads in recent years that have forced borrowing levels to slow, stoked concerns among investors, and slowed spending across the economy.
China Evergrande Group, once the second largest developer, defaulted on its debt in late 2021, while top developer Country Garden has drained cash reserves to meet a series of debt payment deadlines in recent months.
Fears of contagion throughout the property industry has spurred households to rein in consumer spending, which has in turn led to deteriorating retail sales and further economic headwinds.
Beijing has stepped in with a slew of measures designed to right the ship, including easing borrowing rules for banks and lowering loan standards for potential home buyers.
But property prices in key markets remain under pressure, which has served to stifle interest among buyers and add to the pressure on investors and owners.
CEMENT CUTS
With construction activity across China slowing, and several major building sites stopped completely while tussles over debt payments among developers continue, cement output is likely to shrink to multi-year lows by the end of 2023.
During the March to August period, the latest data available, total cement output was 11.36 million short tons, down 2 percent from the same period in 2022 and the lowest for that period in at least 10 years, China National Bureau of Statistics data shows.
In addition to curtailing output in response to the bleak domestic demand outlook in the property sector, cement plants may be forced to curb output rates over the winter months as part of annual efforts to cap emissions from industrial zones during the peak season for coal heating.
Some cement producers will likely look to boost exports in an effort to offset lower domestic sales, and in July China’s total cement exports hit their highest since late 2019.
But Chinese firms will face stiff competition from lower-cost counterparts in Vietnam, which are by far the top overall cement exporters and already lifted overall cement shipments by close to 3% in the first half of 2023, data from the Vietnam National Cement Association (VNCA) shows.
Some Chinese firms may be prepared to sell exports at a loss for a spell while they await greater clarity over the domestic demand outlook.
But given the weak state of global construction activity amid high interest rates in most countries, as well as the high level of cement exports from other key producers such as India, Turkey, United Arab Emirates and Indonesia, high-cost Chinese firms may be forced to quickly contract output to match the subdued construction sector.
And if that’s the case, the sector’s emissions will come down too, yielding a rare climate benefit to the ongoing property market disruption.
The opinions expressed here are those of the author, a columnist for Reuters.
Reporting By Gavin Maguire; Editing by Miral Fahmy
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
BAMAKO, Sept 11 (Reuters) – Sky Mali, the only commercial airline flying to Timbuktu in Mali’s interior, has cancelled flights there due to insecurity, it said on Monday, deepening the isolation of the northern city which has been under a month-long Islamist blockade.
Timbuktu, a UNESCO World Heritage site and ancient trading centre on the edge of the Sahara desert, has been suffering from a shortage of food and aid supplies since a local affiliate of al Qaeda cut off access by road and river in mid-August.
Two residents told Reuters that they heard shell fire near the city’s airport on Monday morning.
Sky Mali later issued a statement saying it had suspended all flights to and from Timbuktu until further notice, citing a security alert.
“We heard several shell shots at Timbuktu airport. Flights are cancelled,” said resident Mohamed Ag Hamaleck.
“Now Timbuktu is completely closed. The access roads are cut, the boats no longer come,” he said by phone.
The city has been surrounded by violence ever since French forces liberated it from militants in 2013 after an uprising. The Islamists later regrouped and have spread from northern Mali to neighbouring Burkina Faso and Niger.
The European Union said last week that the blockade had extended to more localities in the Timbuktu region, including Rharous, Niafounké, Goundam, Diré, Tonka, Ber and Léré.
“Civilians do not have access to essential products and basic social services,” the EU’s humanitarian branch ECHO said in a note.
Insecurity in Mali has intensified over the past year after the West African country’s military leaders kicked out French troops, asked United Nations’ peacekeepers to leave, and teamed up with Russian private military contractors Wagner Group.
An al Qaeda-linked group claimed responsibility on Friday for a suicide attack on a military base in northeastern Mali, a day after authorities blamed the group for carrying out a dual assault on another military camp and on a boat that killed more than 60 people.
Reporting by Tiemoko Diallo; Additional reporting and writing by Nellie Peyton; Editing by Edward McAllister and Hugh Lawson
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An Airbus A319 can be seen flying 500 feet above the ground while on final approach to land at LaGuardia Airport in New York City, New York, U.S., January 6, 2022. REUTERS/Bryan Woolston Acquire Licensing Rights
BRUSSELS, Sept 4 (Reuters Breakingviews) – Short flights within Europe are frequent flyers on wish lists of things to ban. In the name of cutting carbon dioxide emissions, countries from Germany to Spain are proposing to prevent brief air trips, and lobbyists like Greenpeace say governments should require travellers to choose trains or other ground transport for shorter journeys. But not all short flights are alike, and banning commercial hops makes less sense than targeting private jets.
In 2022 aviation emitted 800 million metric tons of CO2, around 10% of the world’s 8 billion tons of CO2 emitted annually by various means of transport, according to the International Energy Agency. In the same year European Union emissions were around 2.5 billion tons and in the recent past flying has contributed about 4%. But most of that is long-haul flights. A 2022 study of 31 European countries found that flights shorter than 500 km account for 28% of departures, but under 6% of fuel burnt.
Commercial jets do pollute more than ground transit, but they also have advantages that can’t be easily matched. To avoid a disproportionate impact on disabled passengers and others en route to more distant destinations, train services need to catch up first. Denying a short flight to connecting passengers could just send them to their cars, according to KLM CEO Marjan Rintel.
Limiting private jet travel would make a bigger difference, with fewer broad-based disruptions. Private jets have a far bigger impact per passenger on the environment than their flying-bus counterparts: as much as 45 times the amount of emissions per passenger, according to the Institute for Policy Studies. Greenpeace data shows that private jet flights in Europe put out 3.4 million tons of CO2 in 2022, twice 2021 levels, and mostly on flights with a range of less than 750 km.
Short-haul bans are especially beside the point when they look more like industrial policy than climate action. In France, where domestic connections are already prohibited for journeys of under two and a half hours, only three routes were actually banned, with projected savings of just 55,000 tons of carbon dioxide output per year. Shuttering unprofitable routes and prohibiting new competition on those legs acted more like a leg-up for Air France’s business plan, according to Davy transport analyst Stephen Furlong.
In any case, there’s a positive non-climate economic case for short-haul flights. They have allowed upstart carriers like Norwegian Air to challenge legacy airlines and rebuild after the pandemic. Connecting flights also make it possible for Brussels Airlines to serve as a hub for passengers in and out of Africa, a lifeline for countries whose livelihoods depend on travel routes.
There’s a case for phasing out shorter flights over time, and for surcharges like Belgium’s 10 euro tax on flights of less than 500 km. But banning brief mass-transit trips now is a hop too far.
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CONTEXT NEWS
Countries such as France, Spain, Belgium and Germany have enacted or are considering measures to reduce or ban short flights. The European Union’s long-term mobility plan calls for discouraging plane travel where lower-impact alternatives exist.
Direct emissions from aviation accounted for 3.8% of the EU’s total carbon dioxide emissions in 2017, according to the European Commission. Aviation is responsible for 14% of transportation-sector emissions.
Greenpeace research found that the number of European private jet flights jumped from 118,756 in 2020 to 572,806 in 2022, with carbon dioxide emissions going from about 355,000 metric tons to 3.4 million tons over the same period. More than half of 2022 private jet travel was for distances of less than 750 km.
Editing by George Hay and Oliver Taslic
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
[1/3]A model of the Ford F-150 Lightning electric pickup is parked in front of the Ford Motor Company World Headquarters in Dearborn, Michigan, U.S. April 26, 2022. REUTERS/Rebecca Cook/File Photo
Aug 10 (Reuters) – Ford Motor (F.N) expects to incorporate more and better software into the trucks and vans in its highly profitable Ford Pro commercial vehicle business and grow revenues by $4,000-$5,000 per vehicle by 2026, a top executive said on Thursday.
Navin Kumar, chief financial officer of Ford Pro, said the automaker would look to boost revenue with software- and data-driven fleet services, safety and security services, partial vehicle autonomy and insurance.
Kumar, speaking at a J.P. Morgan investor conference, did not give a percentage forecast for revenue or profit margin growth, but said Ford’s ability to deliver and profit from those services will be enhanced in the middle of this decade when the company introduces its next-generation electric commercial vehicles with a new digital “intelligence” platform.
That new platform will help Ford Pro meet some ambitious 2026 targets, he said, including doubling the percentage of connected vehicles to about 60% and tripling the percentage of vehicles with paid software to about 36%.
Ford Pro will continue to offer a full portfolio of combustion engine, hybrid electric and full electric vehicles, Kumar said.
Its second-generation EVs, including the successor to the F-150 Lightning pickup, will be more profitable, in terms of their ability to generation additional software and services revenue.
Kumar said the current F-150 Lightning was not “cost optimized,” but declined to say whether it was profitable.
He said Ford Pro expects to boost its commercial vehicle business in Europe with the arrival this fall of a new Transit Custom van and the introduction next year of electric versions of the Transit Courier and Transit Custom.
Reporting by Paul Lienert in Detroit; Editing by David Gregorio
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LAGOS, Aug 1 (Reuters) – A light aircraft crashed and burst into flames while on a test flight in Lagos, Nigeria’s commercial capital, on Tuesday, the Nigerian Safety Investigation Bureau said.
The bureau said it had commenced investigating the accident involving a Jabiru J430 light airplane with registration number 5N-CCQ, which occurred just after 1500 (1400 GMT).
The aircraft was operated by Air First Hospitality & Tours and had two passengers on board, before it crashed around Oba Akran, a busy area of Lagos. There were no fatalities, the bureau said.
Ibrahim Farinloye, Lagos state spokesperson for the National Emergency Management Agency, said two people on board were rescued alive.
Earlier, Olufemi Oke-Osanyintolu of Lagos State Emergency Management Agency said a helicopter had crash-landed on a road in front of the United Bank for Africa building in Lagos, and that four people were taken to hospital.
The NSIB, investigates transport accidents in Nigeria with the aim of identifying the probable cause and providing safety recommendations.
Reporting by Angela Ukomadu and Felix Onuah; Additional reporting by Camillus Eboh; Writing by Chijioke Ohuocha; Editing by Conor Humphries and Leslie Adler
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LONDON, July 6 (Reuters) – Iran’s Revolutionary Guards “forcibly seized” a commercial ship in international waters in the Gulf on Thursday and the vessel was possibly involved in smuggling, a U.S. Navy spokesperson said.
The U.S. Navy had monitored the situation and decided not to make any further response, U.S. 5th Fleet spokesperson Commander Tim Hawkins said.
British maritime security company Ambrey said it was aware of an attempted seizure by Iranian forces of a small Tanzanian flagged tanker, around 59 nautical miles northeast of the Saudi Arabian port city of Dammam.
“Iran regularly intercepts smaller tankers it suspects of smuggling oil,” the company added in a note.
About a fifth of the world’s supply of seaborne crude oil and oil products passes through the Strait of Hormuz, a chokepoint between Iran and Oman, according to data from analytics firm Vortexa.
The U.S. Navy said on Wednesday that it had intervened to prevent Iran from seizing two commercial tankers in the Gulf of Oman, in the latest in a series of attacks on ships in the area since 2019. read more
“U.S. forces remain vigilant and ready to protect navigational rights of lawful maritime traffic in the Middle East’s critical waters,” Hawkins said.
Iran said on Thursday it had a court order to seize one of the tankers sailing in Gulf waters on Wednesday after it collided with an Iranian vessel. The vessel, the Bahamas-flagged Richmond Voyager, was managed by U.S. oil major Chevron (CVX.N). read more
Tehran seized two other tankers in May including the Marshall Islands flagged Advantage Sweet, which had been chartered by Chevron. read more
Since 2021, “Iran has harassed, attacked or seized nearly 20 internationally flagged merchant vessels”, the U.S. Navy said this week.
Reporting by Jonathan Saul; Editing by Hugh Lawson and Andrew Heavens
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[1/4]A still image obtained from a handout video which captured M/T Richmond Voyager being approached by an Iranian naval vessel during an attempt to unlawfully seize the commercial tanker, according to U.S. Navy, in the Gulf of Oman, provided by U.S. Navy on July 5, 2023. U.S. Naval Forces Central…
DUBAI, July 5 (Reuters) – The U.S. Navy said it had intervened to prevent Iran from seizing two commercial tankers in the Gulf of Oman on Wednesday, in the latest in a series of attacks on ships in the area since 2019.
In a statement, the U.S. Navy said that at 0100 local time (2100 GMT), an Iranian naval vessel had approached the Marshall Islands-flagged oil tanker TRF Moss in international waters in the Gulf of Oman.
“The Iranian vessel departed the scene when U.S. Navy guided-missile destroyer USS McFaul arrived on station,” the statement said, adding that the Navy had deployed surveillance assets including maritime patrol aircraft.
The Navy said that around three hours later it received a distress call from Bahamas-flagged oil tanker Richmond Voyager while the ship was more than 20 miles (32 km) off the coast of Muscat, Oman, and transiting international waters.
“Another Iranian naval vessel had closed within one mile of Richmond Voyager while hailing the commercial tanker to stop,” the Navy statement said, adding that the McFaul directed course towards the merchant ship at maximum speed.
“Prior to McFaul’s arrival on scene, Iranian personnel fired multiple, long bursts from both small arms and crew-served weapons,” the Navy said.
“Richmond Voyager sustained no casualties or significant damage. However, several rounds hit the ship’s hull near crew living spaces. The Iranian navy vessel departed when McFaul arrived.”
U.S. oil major Chevron (CVX.N) confirmed that it managed the Richmond Voyager, that crew onboard were safe and the vessel was operating normally.
The TRF Moss’ manager is listed in public database Equasis as Singapore-based Navig8 Chemicals Asia, but Navig8 told Reuters it was not connected with the tanker. The vessel’s manager could not be immediately located.
NO IRANIAN COMMENT
Iran’s state news agency IRNA said on Wednesday that Iranian authorities have not commented yet on the matter.
“The United States will respond to Iranian aggression together with our global allies and our partners in the Middle East region to ensure the freedom of navigation through the Strait of Hormuz and other vital waterways,” a spokesperson for the White House National Security Council said.
Vice Admiral Brad Cooper, commander of U.S. Naval Forces Central Command, cited “the exceptional effort by the McFaul crew for immediately responding and preventing another seizure”.
Since 2019, there has been a series of attacks on shipping in strategic Gulf waters at times of tension between the United States and Iran.
Iran seized two oil tankers in a week just over a month ago, the U.S. Navy said.
“Since 2021, Iran has harassed, attacked or seized nearly 20 internationally flagged merchant vessels, presenting a clear threat to regional maritime security and the global economy,” the Navy statement added.
About a fifth of the world’s supply of seaborne crude oil and oil products passes through the Strait of Hormuz, a chokepoint between Iran and Oman, according to data from analytics firm Vortexa.
Refinitiv ship-tracking data shows the Richmond Voyager previously docked in Ras Tannoura in eastern Saudi Arabia before Wednesday’s incident in the Gulf of Oman.
The Richmond Voyager was now leaving the Gulf with Singapore listed as its destination, Refinitiv ship tracking showed.
Top ship registries including the Marshall Islands and Greece have warned in recent weeks of the threat to commercial shipping in the Gulf including the Strait of Hormuz.
In another point of tension, the U.S. confiscated a cargo of Iranian oil aboard a tanker in April in a sanctions enforcement operation, sources told Reuters.
That vessel, the Marshall Islands-flagged Suez Rajan, is anchored outside the U.S. Gulf of Mexico terminal of Galveston waiting to discharge its cargo, according to Refinitiv ship tracking.
Reporting by Lisa Barrington and Jonathan Saul; Additional reporting by Dubai bureau and Rami Ayyub in Washington; Editing by Jason Neely, Mark Heinrich and David Holmes
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HONG KONG, June 29 (Reuters Breakingviews) – There’s plenty to like about Swire Pacific’s (0019.HK) Coca-Cola sale. The Hong Kong-based property-to-aviation conglomerate on Wednesday evening said it is handing its U.S. drinks subsidiary to its parent for $3.9 billion, allowing it to pay a tasty dividend, cut net debt and still run the division for a fee. It’s a sweet deal for investors, as long as property, airline Cathay Pacific (0293.HK) and other holdings recover soon.
Around $1.5 billion from the expected proceeds will be distributed back to shareholders, while the rest will go towards strengthening Swire’s balance sheet. Both are welcome moves. Net debt at Swire is expected to fall by a third, to HK$38 billion ($4.9 billion) after the sale. The expanded cash pile will be able to cover 7.3 times the company’s borrowing costs, compared to 6 times at the end of last year – a useful buffer amid rising interest rates. Moreover, a special dividend equal to more than what the company has paid out over the past three years combined looks generous for investors who have seen Swire’s Hong Kong shares return a negative 13% since the start of 2023.
Operationally, not much changes. As part of the transaction the Hong Kong-based group has a 13-year contract to keep running Swire Coca-Cola USA, which will allow the conglomerate to maintain its lucrative manufacturing, marketing and distribution deals with the global drinks behemoth. It’s a clever way to dispose an asset without having to part with the business.
For such a cosy deal – the buyer is Swire’s 60%-controlling shareholder John Swire & Sons – the price looks satisfying too. At the implied 12.4 times enterprise value to adjusted 2022 EBITDA, the unit is valued just shy of $30 billion Coca-Cola Europacific Partners (CCEPC.L), which boasts superior margins and growth.
Little wonder Swire’s Hong Kong shares rallied as much as 8% on Thursday morning. Even so, the stock still trades at a dismal 50% discount to its net asset value, per Citi estimates. A property slump in Hong Kong and China, combined with a tough recovery for Cathay Pacific to bounce back to pre-pandemic levels, has weighed on the conglomerate, which owns 45% of the city’s troubled flagship carrier. The Coke sale is refreshing for investors, but only until the rest of Swire Pacific regains its fizz.
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CONTEXT NEWS
Hong Kong conglomerate Swire Pacific on June 28 announced it will sell its Swire Coca-Cola USA subsidiary for HK$30.4 billion ($3.9 billion) in cash to its 60%-controlling shareholder, John Swire & Sons. The company expects a gain of HK$$22.8 billion.
Upon completion of the sale, Swire Pacific will distribute HK$11.7 billion in special dividends to its shareholders. The company also plans to enter into a 13-year agreement to provide management services to Swire Coca-Cola USA and receive an annual fee of at least HK$117 million.
The deal is conditional upon the approval of independent shareholders.
Swire Pacific’s Hong Kong shares were up 5.5% to HK$61.00 on during early morning trading on June 29.
Editing by Antony Currie and Thomas Shum
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WASHINGTON, June 28 (Reuters) – The United States and China agreed to consider expanding commercial flights between the two countries to improve people-to-people contact, the top U.S. diplomat for East Asia, Daniel Kritenbrink, said on Wednesday.
He told a Center for Strategic and International Studies think tank event in Washington that the countries agreed “to look at increasing in a phased manner the number of commercial flights between the United States and China.”
There were about 350 flights a week between the U.S. and China prior to the coronavirus outbreak, compared to 24 a week currently, Kritenbrink said.
“I think we can do better,” he added.
He said the agreement was reached during Secretary of State Antony Blinken’s visit to China earlier this month. During the trip, Washington and Beijing failed to produce any major breakthrough in their rivalry but agreed to stabilize relations. Soon after Blinken’s trip, U.S. President Joe Biden referred to Chinese President Xi Jinping as a dictator.
After the start of the COVID-19 pandemic in 2020, the two countries restricted flights and travel to prevent the spread of the disease, and air service has not been fully restored.
Kritenbrink said he wanted to see an imbalance reversed in the number of Chinese students in the United States and American students in China, which he put at 300,000 Chinese students to 350 U.S. students.
During Wednesday’s event, Kritenbrink described China’s actions in the South China Sea as coercive.
Reporting by Kanishka Singh, David Brunnstrom and Michael Martina in Washington; Editing by Cynthia Osterman
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