Preferred shares of Brookfield Property Partners are being viewed as a compelling investment opportunity as real estate companies with office-related exposure battle high vacancy rates, with many employees continuing to work from home amid an uncertain future. Brookfield Asset Management privatised Brookfield Property Partners in July 2021, issuing the option of receiving common shares in the Brookfield parent, cash or newly issued preferred shares of the delisted REIT. Since then, inflation has surged and higher interest rates have crushed many fixed-income investments, including preferred shares, triggering a fall in the price of Brookfield Property Partners' preferred shares.
Asian stocks fell on concerns of a slowing Chinese economy, with Hong Kong tech stocks hit particularly hard after Alibaba Group reported lower revenue growth than anticipated. China and Hong Kong stocks dropped 0.61% and 1.8% respectively causing a dip in MSCI's broadest index of Asia-Pacific shares outside Japan, with the index ultimately settling with a 0.19% gain for the week. In contrast, Japan's Nikkei rose to a new 33-year peak. Negotiations over US debt (with hopes high for a deal once President Biden returns from the G7 meeting in Japan on Sunday) kept attention on the American markets, while hopes for a quick interest rate hike dwindled further after the number of Americans filing for initial jobless claims fell below expectation.
Chinese technology stocks are continuing to struggle despite recent strong earnings results from the industry's leading companies. Tencent, China's most valuable firm, reported its fastest revenue growth in over a year, while the country's internet search leader, Baidu, announced better-than-expected sales results on Tuesday. However, shares have declined by more than 2.5% for Tencent and 2% for Baidu, reflecting the broader malaise that is affecting Chinese equities. Investors remain concerned over a slowing economic recovery that is not receiving government policy support, as well as the ongoing trade spat with the US.
Alcoholic beverages company Diageo has been praised by Questor for increasing sales and operating profit margins despite rising costs due to inflation. The company has been raising prices and investing in cost efficiency measures. Additionally, the firm has made several acquisitions over recent years to facilitate its strategy to focus more on expensive beverages that are presently gaining in popularity among customers. The company also enjoys exposure to emerging economies in Asia. The upcoming retirement of Diageo's CEO, who has held his role for 10 years, is unlikely to have an impact on the firm's share price performance.
Blackstone-backed Indian REIT Nexus Malls pre-opens 3% higher in trading debut
Reuters
23-05-19 04:27
Blackstone-backed Nexus Select Trust, also known as Nexus Malls, saw its shares rise 3% to 103 rupees in their debut on the National Stock Exchange of India. The company is India's first publicly traded retail real estate investment trust, and consists of 17 shopping complexes, three office buildings and two hotels. The listing comes after Canada's Brookfield Asset Management raised $660m in January by listing Brookfield India REIT. A handful of others have launched, and more are expected as investors seek exposure to a growing and economically stable nation.
Samsung Electronics is reported to have suspended an internal review into replacing Google with Microsoft's Bing as the default search engine on its smartphones, according to the Wall Street Journal. Google and Samsung currently have an agreement, estimated to be worth $3bn to Google annually, to be the default search engine on Samsung smartphones. The report of Samsung's potential move to Bing had caused Alphabet shares to fall, though share price is expected to recover on the news.
Investors should look beyond a stumbling Chinese economy and take advantage of opportunities in retail and travel services, according to Tiffany Hsiao from Artisan Partners Asset Management. The rebound in China's economy looks to have been hit by the re-emergence of Covid, with consumer retail stocks leading the way down, and some are "completely overlooked", Hsiao said. She's more interested in platform advertising stocks, such as Focus Media Information Technology, and travel shares, arguing that Chinese consumers don't immediately jump back into discretionary spending as quickly as their American counterparts. Hsiao looks at alternative data to guide her decisions, including foot traffic in China's main cities, which suggests the economy is "recovering just fine".
The Shanghai Stock Exchange has proposed plans to increase the valuation of Chinese state-backed banks, which are currently discounted by around 36% to their book value. The exchange's General Manager, Cai Jianchun, outlined the plans to executives at a recent meeting, which included the suggestion of businesses holding more investor relations events and the development of index-based fund products. China's banking sector remains one of the most distressed industry groups. Despite a 5.3% gain for 43 banks on the exchange, and a 16% climb in the shares of China's largest listed banking organisations this year, ICBC is trading at 44% below its net asset value.
Leading Chinese internet companies, including Baidu, Tencent and Alibaba, have reported double-digit revenue growth in Q1 2021 from the same period the previous year. However, the companies' futures remain dependent on China's economy. Even though the country is reopening economically, Chinese consumers' low confidence levels in job prospects and future incomes could dampen sales recovery. The companies are also involved in the beginnings of a makeover that involves new growth areas, such as artificial intelligence (AI), which is driving new AI cloud divisions. However, US rivalry and tensions are limiting China's access to crucial microchips needed to develop AI, while a lucrative pool of domestic customers (China's state-owned enterprises) are preferring to use government-backed providers rather than private cloud computing providers. This is alongside client losses due to non-product reasons and investor wariness as growth cannot be expected to return to previous decades' levels.
Indian pharmaceutical company Glenmark Pharmaceuticals saw a 12.3% dip in Q4 profits of $37.78m, as increased input costs and a fall in domestic drug demand took their toll. Glenmark saw a net sales rise of 11.5%, with North America's contribution up by 15.3% and India accounting for 31%. Its India drugs segment, which accounted for 31% of total sales, saw a 6.4% decline. The results come after Glenmark's Glenmark Life Sciences unit, which focuses on active pharma ingredients, posted a 48% increase in Q4 figures. Glenmark's Q4 rivals Dr Reddy's Laboratories and Cipla, both posted higher profits.
Morgan Stanley CEO James Gorman has announced that he will likely step down in the next 12 months, and the board has identified three strong candidates to succeed him. Gorman, who will become executive chairman after the new CEO is selected, has been praised for his leadership, which saw the bank transform into a model focused on asset management and financial advisers. Investors are expected to be hesitant about his departure and see Gorman as a hard act to follow. However, analysts predict that the transition will be orderly and there will be no major change in strategic direction.
The outlook for interest rates is changing as financial markets revise their outlook for inflation. Investors who favour the safety of Government of Canada (GoC) bonds should keep an eye on GoC bond yields to follow rates on guaranteed investment certificates (GICs). The yield on the five-year Canada bond, which governs five-year GICs, jumped this week to 3.4% early Friday from 3% a week earlier due to the April inflation report from Statistics Canada. The year-over-year inflation rate in April edged up to 4.4% from 4.3% in March. It had been expected that inflation would be around 3% later this year and that rate cuts would start to happen around that time or in early 2024. Now, bets for a rate increase this summer are increasing. Bonds fell in price in response, so yields are up for government and corporate bonds. Expect GICs to follow if bond yields hold at recent levels. Short-term GIC rates are currently usually significantly lower than long-term rates, but markets see potential for near-term interest rates to rise and then fall back in the medium term as the economy slows, possibly lapsing into a recession.
Foot Locker shares fell by 26% after the US footwear retailer cut its annual sales and profit forecasts, due to sharp reductions in demand and heavy discounts meant to reduce inventory levels. The high volume of theft since President Donald Trump took office, dubbed the “Trump slump,” has depleted sales of a wide range of firms, such as Home Depot and Target. The firm doubled down on promotions, which originally encouraged demand in its shops but led to the hit on its quarterly gross margins as it accompanied the inventory shrink.
Shares of regional U.S. banks fell on Friday, following reports that Treasury Secretary Janet Yellen had told bank CEOs that further consolidation may be necessary in the industry. Yellen reportedly reassured the CEOs of the strength of the country's banking sector, nonetheless shares in PacWest Bancorp and Western Alliance fell 4%, whilst Comerica, Zions Bancorp, and Valley National Bancorp all experienced losses. The KBW Regional Banking Index fell 3%. The regional banking crisis has been partly blamed on aggressive interest rates by the U.S. Federal Reserve, which forced some lenders to seek new capital to make up for losses due to falling asset values linked to rate fluctuations.
The recent AI frenzy sparked by chatbot sensation ChatGPT has driven the S&P 500's 9% rally so far this year, with Microsoft, Google parent Alphabet, Nvidia, Apple and Meta Platforms accountable for the index's returns, according to Jessica Rabe, co-founder of DataTrek Research. About 25% to 50% of these gains are owed to the buzz around artificial intelligence, Rabe added. A recent Societe Generale analysis showed that removing the 20 AI-related stocks widely owned by ETFs would reduce the S&P 500's performance by about 10 percentage points, putting stocks in negative territory for the year.
India proposes changes to tax on angel investors in unlisted firms
Reuters
23-05-19 16:47
The Indian government has proposed changes to the tax levied on angel investors in unlisted entities in the country. Certain foreign investors, including investments in Indian unlisted firms by central banks, sovereign wealth funds, and government entities with direct or indirect ownership of 75% or more would be exempt from the tax, which is imposed when shares of an unlisted entity are issued to an investor at a price more than its fair market value. The government has also expanded allowable valuation methods and provided a 10% variation in share value to account for factors that may affect the value of shares across multiple rounds of investments.
The Standard & Poor's 500 index (S&P 500) has risen by 9% on the back of increasing interest in artificial intelligence, with five stocks - Microsoft, Alphabet, Nvidia, Apple and Meta Platforms - responsible for all of the average's gains, according to DataTrek Research. The sector's impact on the S&P is so profound that a report by SocGen claimed that removing from the index 20 stocks with the biggest AI connections would leave the S&P in negative territory for the year. A Goldman Sachs report suggests generative AI could expand S&P 500 profit margins by 4 percentage points.
Germany's Dax index reached a record intraday high last Friday, rising 0.9% to surpass 16,320 and become Europe’s second-best-performing main equity market this year. Strong corporate earnings have spurred investor confidence, allowing companies such as Adidas and Siemens to rise nearly a quarter this year despite concerns over the economy. The Dax has returned 17.2% YTD, not far behind France's Cac 40 at 18% but well ahead of the FTSE 100’s 6.2% return and the S&P 500's 10%. The strong earnings have been credited with spurring optimism among investors towards European equities.
Investors often fall victim to confirmation bias, which can lead them to retain a grip on losing investments and ignore valuable information that could help them make better decisions, according to Nicole Pedersen-McKinnon in The Sydney Morning Herald. Studies show investors feel nearly double the pain at losing $1 as they would from feeling the joy of gaining the same amount. Pedersen-McKinnon advises investors to build a diversified portfolio, stick to a set and strict set of investment rules and not be drawn in by confirmation bias.
Spotify's chief content and advertising officer, Dawn Ostroff, is leaving as part of mass job cuts resulting from a 6% reduction in the company's headcount. Spotify is cutting about 600 jobs as part of a restructuring process. Ostroff was the driving force behind Spotify's podcasting investment, spending about $1bn on exclusivity deals and acquisitions, including podcasting company Gimlet and the Duke and Duchess of Sussex's Archetypes series in a reported $25m deal. Investors have begun to question the cost of the podcasting strategy, leading to cutbacks including several production teams in October. Spotify's stock rose 8% in trading in New York.
