Asia Stocks Rise After China Premier Says Growth Is Focus (Source: Bloomberg)
Asian stocks rose, with the regional index rebounding from its biggest drop in six months, after Premier Wen Jiabao said China will focus more on bolstering economic growth. China Overseas Land & Investment Ltd., a developer controlled by the nation’s construction ministry, rose 1 percent in Hong Kong. BHP Billiton Ltd. (BHP) climbed 1.1 percent in Sydney after RBC Capital Markets said the world’s largest mining company may start a new share buyback. Nintendo Co., a manufacturer of game consoles that gets a third of its sales in Europe, slumped 1 percent in Tokyo. The MSCI Asia Pacific Index (MXAP) rose 0.2 percent to 112.80 as of 11:25 a.m. in Tokyo, with about about the same number of stocks rising and falling. The gauge fell 2.5 percent on May 18, the most since Nov. 10 and wiping out this year’s gains as Europe’s debt crisis worsened and U.S. economic data missed estimates.
Wen’s pledge on Chinese growth “will be a support for the market when we see clear signs of it,” said Shintaro Takeuchi, portfolio investment group manager at Tokio Marine & Nichido Fire Insurance Co. that manages $109 billion in assets. “Stocks are becoming cheaper and fewer people are selling them, but they’re not enough to buy either.”
Japan Stocks Swing From Gains, Losses on Euro Uncertainty (Source: Bloomberg)
May 21 (Bloomberg) -- Japanese stocks swung between gains and losses as French and German leaders discussed the future of the European Union after the Group of Eight nations failed to deliver a unified strategy to tame the debt crisis. Shares rose earlier on a weaker yen and on speculation they were oversold. Sony Corp. (6758), a consumer electronics company that depends on Europe for a fifth of its revenue, slid 0.6 percent after earlier gaining 1.6 percent. Renesas Electronics Corp. slumped 8 percent after Goldman Sachs Group Inc. cut the chipmaker’s investment rating. Fanuc Corp. (6954), Japan’s biggest maker of factory robotics, rose 3 percent on a report it plans to boost production. The Topix Index slid 0.1 percent to 724.97 as of 10:15 a.m. in Tokyo after swinging between gains and losses at least seven times. The measure fell 4.3 percent last week, capping the longest weekly losing streak since September 2011. The Nikkei 225 Stock Average (NKY) gained 0.3 percent to 8,640.95.
“It’s very important that a clear way forward is established” for the European debt crisis, said Tim Schroeders, a portfolio manager who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Given we had a number of false starts until we reached this juncture, people will await a lot more clarity before reverting to a risk-on stance.”
S&P 500 Falls for 3rd Week in Longest Slump Since August (Source: Bloomberg)
U.S. stocks tumbled for a third week, pushing the Standard & Poor’s 500 Index to its longest losing streak since August, amid concern global economic growth is slowing and Greece may leave the euro area. All 10 industries in the S&P 500 fell. Financial and raw- material companies dropped at least 6.5 percent as shareholders sued JPMorgan Chase & Co. (JPM) over the company’s $2 billion trading loss and the Dollar Index’s longest rally ever reduced the prices of commodities. J.C. Penney Co. and Abercrombie & Fitch Co. (ANF) each plunged 23 percent after reporting sales that missed analysts’ estimates. Facebook Inc. climbed 0.6 percent in its trading debut, erasing most of an 18 percent rally. The S&P 500 tumbled 4.3 percent to 1,295.22, the biggest retreat since November. The index sank 7.7 percent over three weeks, trimming its 2012 gain to 3 percent.
The Dow Jones Industrial Average slipped 451.22 points, or 3.5 percent, to 12,369.38, the lowest level since Jan. 6. The Nasdaq Composite Index (CCMP) plunged 5.3 percent, the most since September, to 2,778.79, extending its loss from a March high to 11 percent. “We sort of hit an air pocket in terms of positive catalysts and meanwhile Europe keeps weighing on the market,” John Kattar, chief investment officer at Eastern Investment Advisors in Boston, which manages $1.7 billion, said in a phone interview. “It was a very good earnings season, but that catalyst is behind us.”
European Stocks Post Biggest Weekly Drop in Eight Months (Source: Bloomberg)
European stocks posted the biggest weekly drop since September as Greece moved closer to a possible exit from the euro and concern mounted that Spanish banks will need rescue. A gauge of lenders slumped for the third week, as Banco Espirito Santo SA (BES) lost the most since at least 1993. Bankia SA lost 15 percent. Opap SA (OPAP) closed in Athens trading with the biggest slide since it sold shares to the public in 2001, after first-quarter profit decreased 21 percent. The Stoxx Europe 600 Index (SXXP) fell 5.2 percent to 238.88 this week. The gauge has tumbled 12 percent since this year’s high on March 16 as Greek leaders failed to form a government after elections, squabbling over austerity measures.
“The markets are signaling a risk-off attitude and signs of fatigue regarding the question about what to do with Greece are evident,” said Ben Hauzenberger, a Zurich-based fund manager at Swisscanto Asset Management AG, which oversees $53 billion. “Investors are wondering what will happen to the euro in the case of a Greek exit and which countries could follow in its footsteps.”
Bovespa Futures Gain on Cheapest Valuation in Four Months (Source: Bloomberg)
The Bovespa index snapped its longest losing streak in 10 years as the cheapest valuations since January spurred speculation the rout was excessive. Vale SA (VALE3) rose the most in five weeks after saying it expects a recovery in iron ore prices in the second half of the year. Retailer Lojas Renner SA advanced as traders stepped up bets on interest rate cuts after a report showed Brazil’s economy unexpectedly contracted in March. PDG Realty SA Empreendimentos e Participacoes (PDGR3) led declines on the BM&F Bovespa Real Estate Index (IMOBBV), which dropped to a seven-month low. The Bovespa added 0.9 percent to 54,513.16 at the close in Sao Paulo, paring its weekly decline to 8.3 percent. Brazilian stocks entered a bear market yesterday after tumbling 21 percent from this year’s high on March 13. The benchmark trades at 9 times analysts’ earnings estimates for the next four quarters, the lowest since Jan. 2.
“Some stocks look cheaper, and given how fast the market plunged in the past few days, a short-term rebound was expected,” Jose Luiz Garcia, who helps manage 3.2 billion reais ($1.6 billion) at Mercatto Gestao de Recursos, said by phone from Rio de Janeiro. “Still, I don’t think we’re seeing a sustained recovery. The outlook for growth seems to be getting worse everywhere.”
Investors Least Bullish in 2012 as Crisis Escalates: Commodities (Source: Bloomberg)
Hedge funds reduced wagers on a rally in commodities to the lowest this year on mounting speculation that Greece will leave the euro, slowing global growth and curbing demand for everything from copper to soybeans. Money managers reduced net-long positions across 18 U.S. futures and options by 15 percent to 616,841 contracts in the week ended May 15, the lowest since Dec. 27, Commodity Futures Trading Commission data show. Gold bets fell for a second week and to the lowest since December 2008, while copper holdings tumbled 69 percent, the most in five weeks. Cotton wagers tumbled to the lowest in five years.
About $4 trillion was erased from the value of global equity markets this month as Europe’s debt crisis escalated. Moody’s Investors Service lowered debt ratings on 16 Spanish banks on May 17, while Fitch Ratings cut Greece’s credit rating on concern that the country may be the first to exit the 17- nation currency bloc. Home prices in China, the biggest metals consumer, fell in a record number of cities last month, government data showed. “The outlook for commodities is not good,” said Eric Sprott, who runs Toronto-based Sprott Asset Management LP, which manages $9 billion of assets. “The world economies are slowing down. China’s growth rate is softening, and it’s not even debatable whether there will be a recession in Europe.”
The Standard & Poor’s GSCI Spot Index of 24 commodities fell for a third consecutive week, losing 2 percent and capping the longest slump since September. The MSCI All-Country World Index of equities dropped 5.3 percent, and the dollar climbed 1.3 percent against a basket of six major currencies. Treasuries returned 0.7 percent, a Bank of America Corp. index shows.
FOREX-Euro at 4 month low against dollar as crisis spins
LONDON, May 18 (Reuters) - The euro hit a four-month low against the dollar and 3-1/2 month trough versus the yen as concerns about a chaotic Greek exit from the euro zone and instability in the Spanish banking system fuelled demand for safer currencies.
"If it's not Greece, it's Spain that we talk about to sell the euro. People are looking for bad news and they are concerned there appears to be no solution for the situation," said Lutz Karpowitz, currency analyst at Commerzbank.
Yen Drops Versus Peers on Prospects BOJ to Add Stimulus (Source: Bloomberg)
The yen dropped versus all of its major counterparts on speculation the Bank of Japan (8301) will add to stimulus measures this week to support growth and weaken the nation’s currency. The yen trimmed its gain from last week against the U.S. dollar before a May 23 report that may show Japan had a trade deficit for a second-straight month. Demand for the euro was limited ahead of data forecast to show consumer confidence in the 17-nation currency bloc dropped to a four-month low in May amid concern the debt crisis is worsening. The Dollar Index (DXY) fell for a second day as Asian stocks advanced, curbing demand for the relative safety of the U.S. currency. “If the yen continues to strengthen, there will be more pressure on the BOJ to act,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency-margin company. “There may be more verbal intervention to weaken the yen.”
The yen fell 0.2 percent to 79.15 per dollar as of 11:36 a.m. in Tokyo after it climbed 1.2 percent in the five days ended May 18. The Japanese currency declined 0.3 percent to 101.31 per euro. The euro was at $1.2801 from $1.2780 on May 18, when it completed a 1.1 percent weekly slide.
Korean Won Rebounds as Investors Await EU Summit; Bonds Fall (Source: Bloomberg)
South Korea’s won rebounded from a five-month low and government bonds fell on speculation European leaders will come up with a strategy to ease the region’s debt crisis when they meet this week. German Finance Minister Wolfgang Schaeuble will discuss the 17-nation currency with his French counterpart, Pierre Moscovici, today before European Union leaders meet for a summit meeting in Brussels on May 23. The won jumped the most in four months and the Kospi Index (KOSPI) advanced as overseas investors boosted their holdings of Korean shares, ending a 13-day run of net sales. “The won is taking a breather after sharp losses,” said Han Sung Min, a Seoul-based currency dealer at Busan Bank. “Some investors think Europe-related negative issues were all reflected in last week’s declines.”
The won gained 0.7 percent to 1,164.32 per dollar as of 9:25 a.m. in Seoul, after sliding 2.2 percent last week, according to data compiled by Bloomberg. The currency touched 1,175.30 on May 18, the weakest since Dec. 20. One-month implied volatility for the won, a measure of exchange-rate swings used to price options, fell 14 basis points, or 0.14 percentage point, to 11.79 percent.
Treasuries in Longest Winning Streak Since ’98 on Europe (Source: Bloomberg)
Treasuries posted the longest streak of gains in more than 13 years, pushing 10-year yields close to a record low, as investors sought the safety of U.S. government securities while Europe’s debt crisis worsens. U.S. debt rallied as Greece failed to form a government after elections May 6 gave no political party control of the legislature and as Moody’s Investors Service cut the credit ratings of 16 Spanish banks, citing economic weakness and the government’s mounting budget strain. The U.S. auctioned $13 billion of 10-year inflation-protected notes at a record negative yield and will sell $99 billion in notes next week. “I can’t make the argument for rates to move up visibly higher from here because you still have all of these forces weighing on the whole U.S. rate structure,” said Kevin Flanagan, a Purchase, New York-based fixed-income strategist for Morgan Stanley Smith Barney.
The 10-year yield fell 12 basis points this week, or 0.12 percentage point, to 1.72 percent in New York, according to Bloomberg Bond Trader prices. The 1.75 percent note due in May 2022 rose 1 1/32, or $10.31 per $1,000 face amount, to 100 1/4.
Payrolls Increase in 32 States, Led by Indiana and Texas (Source: Bloomberg)
Payrolls increased in 32 states in April, while the unemployment rate dropped in 37, indicating the labor market improved across much of the U.S. Indiana led the nation with a 17,100 gain in payrolls, followed by Texas with 13,200 more jobs. The jobless rate dropped the most in Arizona and Oklahoma from the prior month. The U.S. added the fewest number of workers in April, while the jobless rate unexpectedly fell to a three-year low of 8.1 percent as people left the labor force, data showed this month. The world’s largest economy needs faster hiring to spur consumer spending and to help reduce unemployment, which Federal Reserve policy makers have said remains elevated. “There has been improvement in the labor market,” Millan Mulraine, senior U.S. strategist at TD Securities Inc. in New York, said before the report. “Employment is increasing.”
Fed May Prefer Another Twist to Adding Assets (Source: Bloomberg)
Federal Reserve policy makers may find another round of Operation Twist is preferable to an outright asset-purchase program if the economy shows further signs of weakness or risks increase. Chairman Ben S. Bernanke on April 25 said he was prepared to take further action to aid the economy if necessary, even as he signaled that he didn’t see an immediate need to add stimulus with inflation near the Fed’s goal and unemployment falling. The minutes from the Fed’s April meeting showed several policy makers said additional action could be necessary if the recovery slips. “If there were scope to do another twist of some type it would be prudent to consider it, especially in the scenario where things are worse and the Fed feels like it needs to move,” said Nathan Sheets, Global Head of International Economics at Citigroup Inc. in New York. Until August, Sheets was the Fed’s top international economist.
Economists such as Sheets and Credit Suisse Securities’ Dana Saporta say the Fed’s $400 billion program to extend the maturity of bonds has been just as effective as earlier programs to expand its balance sheet, known as quantitative easing. That may make another version of the maturity extension, which is dubbed Operation Twist and is set to expire in June, preferable because it doesn’t risk the same political backlash.
Manufacturing, Housing Probably Improved: U.S. Economy Preview (Source: Bloomberg)
Manufacturers probably received more orders in April and home sales rose, a sign the U.S. expansion is still on track, economists said before reports this week. Factory bookings for long-lasting goods rose 0.3 percent last month after falling 3.9 percent in March, according to the median forecasts of 61 economists surveyed by Bloomberg News before a May 24 Commerce Department report. Other figures may show purchases of existing and new houses also climbed. Manufacturers may keep forging ahead as automakers crank out more cars and trucks, while housing will probably benefit from record-low mortgage rates that are making properties more affordable. Nonetheless, those industries alone will fail to spur a pickup in growth without bigger increases in employment throughout the economy that will propel consumer spending.
“The economy is growing, but it’s just not growing at an inspiring pace,” said Brian Jones, a senior U.S. economist at Societe Generale in New York. “The production numbers look OK, the housing market looks OK, the thing we’re more concerned about is the labor market.”
JPMorgan’s Home-Loan Debt in Europe Increases Anxiety: Mortgages (Source: Bloomberg)
JPMorgan Chase & Co. (JPM)’s holdings of home-loan bonds from outside the U.S. soared 35-fold in the past three years. Now, with its chief investment office facing scrutiny after a $2 billion trading loss, investors are raising concern the European market’s biggest buyer will pull back. The largest U.S. bank by assets accelerated its purchases last quarter, adding $8.5 billion to lift its total to $74.5 billion, according to regulatory filings. The New York-based company’s investments approached 9 percent of the size of the Dutch and U.K. mortgage-bond markets it’s been focusing on. If they stop buying, it would be pretty bad as they are one of the major buyers at the moment,” said Frank Erik Meijer, head of asset-backed securities at The Hague-based Aegon Asset Management, which manages 220 billion euros ($280 billion). “If they need to sell, that would certainly give rise to quite some” increases in yields relative to benchmark rates.
JPMorgan bolstered prices and issuance when Europe’s lenders were forced to shrink and other potential buyers shunned asset-backed notes after U.S. subprime mortgage debt sparked a global credit crisis, according to six people at banks and investment firms active in the home-loan bond market who declined to be identified because they were speaking about a competitor. Chief Executive Officer Jamie Dimon, 56, last month described the securities as part of the chief investment office’s “very conservative” holdings, four weeks before announcing an unrelated $2 billion derivative loss that highlighted the division’s influence in certain credit markets.
Facebook Stalls in Public Debut After Record $16B in IPO (Source: Bloomberg)
Facebook Inc. (FB) hovered near the initial public offering price in its trading debut, following a record IPO that made the social network more costly than almost every company in the Standard & Poor’s 500 Index. (SPX) The shares rose 23 cents above the IPO price of $38 as of 4 p.m. in New York. Facebook sold 421.2 million shares to raise $16 billion yesterday, giving the company a $104.2 billion market value. Underwriters bought Facebook’s stock to keep it from falling below the IPO price, people with knowledge of the matter said today. The offering valued the company at 107 times trailing 12-month earnings, more than every S&P 500 member except Amazon.com Inc. and Equity Residential. The performance disappointed some investors who expected a first-day pop.
“They squeezed the lemon dry here,” said Dan Veru, chief investment officer at Palisade Capital Management, who didn’t participate in the IPO. “They didn’t leave enough on the table. You want to price these things a little lower, so that the shares have better support in the aftermarket.”
Premier Wen Says China Will Focus on Growth, Xinhua Reports (Source: Bloomberg)
Chinese Premier Wen Jiabao said the government will focus more on bolstering economic growth, indicating policies may be loosened further as inflation moderates. “The country should properly handle the relationship between maintaining growth, adjusting economic structures and managing inflationary expectations,” Wen said during a tour of Wuhan, the capital of China’s Hubei province, from Friday to Sunday. “We should continue to implement a proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth,” Wen said. Wen’s remarks cited in the report, which didn’t mention concern about inflation, indicate the government might take more aggressive steps to support the economy after April data showed the slowdown may be sharper than expected. The central bank this month cut banks’ reserve requirement ratio for the third time since November to boost liquidity.
“Going forward, we expect a clearer easing in macro policy and a pickup in sequential growth,” Goldman Sachs Group Inc. economists said in a research note on May 18, adding liquidity conditions will probably be loosened while approvals on new infrastructure projects could be accelerated.
China Will Quicken Approvals for Qualified Foreign Investors (Source: Bloomberg)
China will work to speed up approvals of qualified foreign institutional investors looking to buy into its domestic securities, as part of reforms to add depth to the country’s capital markets. The foreign exchange regulator has already accelerated approvals for long-term foreign investors such as pension funds, raising their initial investment quotas and simplifying procedures after the government last month more than doubled quotas for QFIIs to $80 billion from $30 billion, according to a statement on the State Administration of Foreign Exchange's website yesterday.
Introducing more long-term funds from abroad will help improve market confidence, promote stable growth in China’s capital markets and provide “robust” investment returns to domestic investors, the China Securities Regulatory Commission said in a statement on its website on May 18. The CSRC is mulling amendments to QFII rules to lower entry requirements, broaden the types of investors and relax restrictions on quota and investment scope, the securities regulator said. “SAFE has been working closely with China Securities Regulatory Commission to facilitate the capital market reforms,” Sun Lujun, head of the capital-account management department at the foreign exchange regulator, said in yesterday’s statement. “We’ll look to speed up the QFII approval process and enlarge the size of investment.”
Alibaba Buys Back About 20% Stake From Yahoo for $7 Billion (Source: Bloomberg)
Alibaba Group Holding Ltd., China’s largest e-commerce provider, agreed to repurchase about a 20 percent stake in itself from U.S. Web portal Yahoo! Inc. (YHOO) for about $7.1 billion ahead of a potential initial public offering. Yahoo will receive at least $6.3 billion in cash and as much as $800 million in newly issued Alibaba preferred stock, the companies said in a statement today. Alibaba also will be required to either buy back a quarter of Yahoo’s current stake at the price of a future IPO or let Yahoo sell the shares in the IPO. The purchase price, based on equity financings, is subject to a floor valuation of about $35 billion. Alibaba has been trying to buy back the stake in itself for more than a year and stepped up efforts in September as its prospects rise for growth and expansion beyond China.
While the deal reduces Yahoo’s presence in China, the world’s largest Internet market, it may aid turnaround efforts as the Web portal competes with Google Inc. and Facebook Inc. (FB) for users and advertising dollars. “The cash from a transaction will help Yahoo as it grapples with the challenges in its business,” Jim Tang, a technology analyst at Shenyin Wanguo Securities in Shanghai, said before the announcement. “While Alibaba is the clear leader in the Chinese e-commerce market, it’s been difficult for Yahoo to cash out of its investment, since Alibaba is not publicly traded.”
Vietnam Economic Slowdown Seen in Cobweb-Covered Crates (Source: Bloomberg)
Nguyen Thi Ha sighs as she looks at the dust and cobwebs covering crates full of colorful, enameled tiles in her factory by Hanoi’s Red River. “We’re struggling to keep our business alive,” said Ha, who laid off more than half of her 60 employees this year as luxury hotels in the beach resort of Danang halted orders. “If the situation doesn’t improve, it will be hard for us to hold out beyond this year.” Ha’s factory is among thousands in Vietnam that cut production or closed this year after policy makers curbed a lending spree and bad debts mounted. As demand also slows from Europe to China, the shakeout of businesses that mushroomed during the 2002-2007 boom is slowing economic growth and may temper a stocks rally that made Vietnam the world’s third-best performer this year.
“There’s no way we can meet the economic growth target of 6 percent this year when so many companies are in serious trouble,” said Le Dang Doanh, an economist who has advised Prime Minister Nguyen Tan Dung and who estimates 2012 expansion may slow to as low as 5 percent, the least since 1999. “Many businesses are on their last breath.”
Iran Finds Its First Caspian Sea Oil for More Than a Century (Source: Bloomberg)
Iran has discovered oil in its Caspian Sea waters for the first time in more than a century, the state-run Fars news agency reported. The deposit was found at a depth of 2.5 kilometers (1.5 miles) during drilling on a natural-gas field and may contain 10 billion barrels of crude, Fars said, citing the National Iranian Oil Co. That’s equal to 7 percent of Iran’s known reserves. While Iran is the second-largest oil producer in the Organization of Petroleum Exporting Countries, most existing fields are in the south and the Persian Gulf. Hampered by sanctions over nuclear ambitions, it doesn’t yet extract crude in the Caspian, where nations including Azerbaijan are tapping deposits and demarcation lines over territory are disputed.
“Iran has never found anything in its section of the Caspian because it’s deep water, so these would be the first wells ever drilled,” said Robin Mills, head of consulting at Dubai-based Manaar Energy Consulting and Project Management. “Ten billion barrels is certainly something to talk about. The question is whether Iran has the technology to develop it.”
Euro Crisis Resolution Sought by Franco-German Leaders After G-8 (Source: Bloomberg)
German and French leaders meet this week to map out a revised plan for the euro as the Group of Eight exposed disagreement on a rescue strategy, Greece lurched toward a possible exit and Spain’s budget deficit widened. German Finance Minister Wolfgang Schaeuble will for the first time discuss the 17-nation currency at a meeting with his newly installed French counterpart, Pierre Moscovici, in Berlin today as European Union leaders prepare for a summit meeting in Brussels on May 23. After three shorter meetings in the last week, Chancellor Angela Merkel and French President Francois Hollande will seek to balance France’s desire to jump-start growth with Germany’s preference for spending cuts. “We’re all very pleased that France wants to offer new initiatives with its newly elected president,” Schaeuble told the Bild am Sonntag newspaper in an interview yesterday. “The German government is ready to talk about anything,” Schaeuble said, though he ruled out measures that would raise debt.
G-8 leaders on May 19 urged Greece to stay within the euro area as polls in the country showed a close race between parties supporting and opposing the EU’s bailout deal. With the country preparing for a second ballot on June 17, renewed concerns about the currency area were fanned last week as Spain revised its 2011 deficit upward -- even as its borrowing costs approached levels that prompted bailouts in Greece, Ireland and Portugal.
Australian Budget Prices Contracting Euro Economy, Swan Says (Source: Bloomberg)
Australia’s federal budget, targeting a return to surplus next fiscal year, is taking a conservative view of Europe’s economic outlook, forecasting a 0.75 percent contraction this year, Treasurer Wayne Swan said. “Determined, consistent and continuing action will be required by European policy makers to deal with the sovereign debt crisis, get their budgets back on a sustainable footing, and restore growth,” Swan said in his weekly economic note yesterday. Australia’s “budget takes a conservative view of Europe’s economic outlook, with the euro area forecast to contract by 3/4 of a percent in 2012.” Prime Minister Julia Gillard’s minority government, seeking to impress voters as a sound economic manager, this month promised to achieve a budget surplus of A$1.54 billion ($1.52 billion) for fiscal 2012-13, ending four years of deficits. Her Labor Party faces a general election next year.
“Australia is not immune from events in Europe,” Swan said in the note. “But it’s important we don’t lose sight of the fact that our economic credentials are among the strongest in the world: we have one of the lowest unemployment rates in the developed world, we have sturdy public finances with very low public debt.”
Boom-Era Debt Sparking German Apartment Sales: Mortgages (Source: Bloomberg)
Germany’s multi-family housing market is set to have the most deals in five years as investors including private-equity firms are forced to sell almost 100,000 apartments to pay debt amassed in last decade’s buyout boom. There were 2.9 billion euros ($3.7 billion) of apartment property transactions in the first quarter alone, more than three times the amount a year earlier, and the total this year may exceed 6 billion euros, the most since 2007, according to estimates by London-based real-estate broker Savills Plc. Fortress Investment Group LLC (FIG) and Guy Hands’s Terra Firma Capital Partners Ltd. are among private-equity firms facing debt maturities after buying thousands of German properties with the easy credit available in the years before the financial crisis hit in 2008. Loans for the deals were typically packaged and sold as commercial mortgage-backed securities. A total of 10 billion euros of German multifamily CMBS is now set to mature by the end of 2014, according to data compiled by Bloomberg.
“The main issue facing the larger players is purely refinancing risk on maturity due to the size of their outstanding debt,” said Nassar Hussain, founder of London-based real-estate debt adviser Brookland Partners LLP.
