BEIJING (Reuters) – China’s property investment hit a two-year low in December even as it grew at a solid pace in 2019, adding to recent signs of a slackening in the sector and suggested Beijing might need to offer more stimulus to stabilize a cooling economy.
Real estate investment, which mainly focuses on the residential sector but includes commercial and office space, increased 9.9% in 2019 from the year-earlier period, down from 10.2% in the first 11 months but still outpaced a 9.5% gain in 2018.
In December alone, year-on-year growth slowed to 7.3% from 8.4% in November, the weakest pace since December 2017, according to Reuters calculations based on data released by National Bureau of Statistics (NBS) on Friday.
The reading was in line with other activity data out on Friday that showed the world’s second-largest economy grew 6.1% in 2019, the slowest in 29 years, and was likely helped by looser monetary policy as it gave developers relatively easier access to credit.
New bank lending in China hit a record of 16.81 trillion yuan ($2.44 trillion) in 2019, while China’s central bank has announced eight cuts in banks’ reserve requirement ratio (RRR) since early 2018, freeing up more funds and driving down lending costs.
“There was some slowdown in December but we don’t need to be too concerned with property because things are improving on the financing side,” said Yang Yewei, a Beijing-based analyst with Southwest Securities, who noted an increase in mortgages in December.
Funds raised by China’s property developers grew 7.6% in 2019 year-on-year, NBS data showed, faster than the 7% pace in the first eleven months.
Chinese property developers kicked off the new year with a strong pipeline of bond issuance, in particular for long-tenor notes, taking advantage of easier regulatory approvals and robust market demand.
But analysts say investment in actual construction has slowed notably as developers exercised caution, although they appear still eager to bid for land.
Measured by floor area, new construction starts rose 7.4% in December from a year earlier, recovering from a 2.9% decline in November when it hit the worst level seen in more than two years, according to Reuters calculations.
Land sales by floor area in 300 major cities tracked by China Index Academy fell 1% on-year in 2019, while transaction value surged 19%, providing a much needed boost to local government purse strings.
The government is keen to defuse housing bubbles after years of supercharged price gains. However, since the real estate sector remains a key pillar of the economy, any more weakness could influence the pace and scope of fresh stimulus measures expected from Beijing this year.
Property sales by floor area, a major indicator of demand, fell 0.1% in 2019 from a year earlier, marking the first full-year decline in five years since the last downturn in 2014, when it slumped 7.6%, the NBS data showed on Friday.
In December, they fell 1.7%, compared with a modest increase of 1.1% in the previous month, ending five months of consecutive growth, Reuters calculated from official data.
Analysts say a continued downturn in sales on the back of government controls to curb speculation will constrain price growth in coming months, dampening developers’ appetite for front-loading construction.
Data on Thursday showed China’s new home prices grew at their weakest pace in 17 months in December, with broader curbs on the sector continuing to cool the market in a further blow to the sputtering economy.
Some analysts say the government could potentially dial back stimulus when economic growth stabilizes in order to lower debt risks.
“It is likely that the government could take the chance of an economic warm-up to consolidate local government finance and continue the property market control, which might set an up-limit for GDP growth in this year,” J.P. Morgan Asset Management Global Market Strategist Chaoping Zhu wrote in a note.
(Reporting by Yawen Chen and Ryan Woo; Additional Reporting by Stella Qiu; Editing by Shri Navaratnam)
Nippon Life to double foreign real estate, infrastructure investment by 2021 – TheChronicleHerald.ca
By Tomo Uetake and Hideyuki Sano
TOKYO (Reuters) – Nippon Life Insurance Co, Japan’s largest private life insurer, plans to double its investment in foreign real estate and infrastructure by early next year, its top investment official told Reuters on Tuesday.
The move came amid growing expectation that low interest rates in Japan and other developed countries are likely to stay for a long time and therefore the insurer will need a new source of income.
Nippon Life plans to commit a total of 350 billion yen ($3.2 billion) to investments in real estate and infrastructure, mostly in North America and Europe, through funds of funds, said Kazuhide Toda, the company’s chief investment officer.
The investment would be made gradually over years, by responding to fund managers’ capital calls. The size of its investments in alternative assets was likely to about 380 billion yen by early 2021, double the level at the end of the last financial year, in March 2019, Toda said.
Like many investors in Japan and Europe, Nippon Life’s profits have been squeezed by dwindling bond yields in Japan and elsewhere.
The 10-year JGB yield stood at minus 0.04% on Tuesday, after having plunged to as low as minus 0.295% last September on fear of U.S.-China trade war.
Most European bonds also have negative yields while in the United States, now the highest-yielding among developed countries, 10-year Treasury notes yield about 1.6%, compared with more than 3.5% decade ago.
Nippon Life expects investments in the alternative assets to yield about 8% and expects to be able to afford to invest more in such illiquid assets.
On top of yield enhancement, increasing exposure to foreign real assets brings more benefits in terms of diversification, Toda said.
Partly to fund increased investment in alternative assets, Nippon Life has been expanding the use of derivatives, such as interest rates swaps and options, in its fixed income portfolio in the yen, the core of its assets.
Including group firms, Nippon Life has total assets of 81 trillion yen.
($1 = 109.70 yen)
(Additional reporting by Kazuhiko Tamaki; Editing by Robert Birsel)
Why we make bad investment decisions, the 2020 ETF Buyer’s Guide, and advice on dumping your advisor – The Globe and Mail
Tim Ferriss is a venture capitalist – an early investor in Shopify, Uber and Facebook among numerous others – and the host of the massively popular Tim Ferriss Show podcast.
In a recent blog post, Mr. Ferriss announced his initially surprising decision to avoid reading any books in 2020 – not a single one. He confessed that he had spent too much time trying to stay on top of current events and discussions when what he actually wanted to do was get to the bottom of things.
Mr. Ferriss cited an intriguing quote by South African activist Desmond Tutu to provide a metaphor that describes his intellectual goals for the year, “There comes a point where we need to stop just pulling people out of the river. We need to go upstream and find out why they’re falling in.”
Applied to investing, this suggests we should spend less time listing the numerous common mistakes investors make and attempt to understand the ways basic human psychology leads us to make them.
Nobel Prize winning psychologist Daniel Kahneman, author of Thinking Fast, And Slow was introduced as ‘the most influential living psychologist’ in a recent podcast hosted by Shane Parrish. Professor Kahneman offered insight that can be readily applied to investing, and the highlights are listed on Mr. Parrish’s Farnam Street website along with the link to the podcast.
The one-hour interview is well worth the time, as the discussion ranges through many pertinent topics including why Mr. Kahneman believes people don’t value happiness very highly, and how the colour of a room can distort decision making.
The bullet points below represent the specific highlights, in Mr. Parrish’s words, that are most relevant to investors. I suggest that readers consider each one – slowly, in Mr. Kahneman’s terminology – and look for ways these psychological tendencies might be negatively affecting their portfolios,
· Very quickly you form an impression, and then you spend most of your time confirming it instead of collecting evidence.
· We have beliefs because mostly we believe in some people, and we trust them. We adopt their beliefs. We don’t reach our beliefs by clear thinking.
· Independence is the key because otherwise when you don’t take those precautions, it’s like having a bunch of witnesses to some crime and allowing those witnesses to talk to each other.
· What gets in the way of clear thinking is that we have intuitive views of almost everything…. What gets in the way of clear thinking are those ready-made answers, and we can’t help but have them.
— Scott Barlow, Globe and Mail market strategist
This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.
Stocks to ponder
Air Canada The recent share price weakness is anticipated to continue as the coronavirus spreads worldwide, the death toll rises, and news that the virus can be spread to others even when an infected person is asymptomatic. The share price closed at a record high of $52.09 on Jan. 13 and since then has dropped over 9 per cent. However, as the share price continues to fall, this may represent a buying opportunity for longer-term investors. This is a stock to watch for now; it is not yet in oversold territory. Jennifer Dowty profiles this profile of the stock.
Alpha Pro Tech This Canadian-headquarter protective apparel stock is skyrocketing on the coronavirus outbreak. Traded in the U.S., it’s been a holding of The Contra Guys for some time. They share their latest thoughts on the stock.
CAE Inc. After Boeing Co. recommended this month that all pilots of its 737 Max planes get training on flight simulators before the grounded aircraft return to the skies, CAE Inc. shares surged to record highs. The reason? The Montreal-based flight simulation company has found itself in a sweet spot amid a swell of interest in its pilot-training services and technology. Now, though, investors are facing a tough question: How much further can this rally go? Read more from David Berman
How equity markets have developed their own idea of fair value
The argument about whether equity markets are too expensive rages on, while, at the same time, stock prices in Canada and the U.S. have arranged themselves into a comprehensible assessment of fair value that no one’s talking about. Scott Barlow has this analysis that could aid investors to uncover promising opportunities.
Others (for subscribers)
Monday’s Insider Report: CEO unloads $11-million worth of stock
Ask Globe Investor
Question: For the past 20 years, my husband and I have had a financial planner at a private company, Aligned Capital Partners, Inc. He has taken care of all of our investments, including RRSPs. He charges a management fee of 1.13 per cent. When I calculated this over the 20 years we have been with him, I was aghast! I blame us for not learning enough about investing before we made the decision to go with this him.
The returns on our investments have been good as far as I know but I’m embarrassed to say that I do not know for sure, and currently simply don’t have the time to go through all of our records.
My question is: if we “break up” with this advisor (and we would have no desire to go with any other independent financial investment company) and move all our investments to our bank (CIBC) to work with a financial advisor there, who doesn’t charge a management fee, what might the penalty be? Would the bank possibly pay this fee in order to get our money?
We have about 10 years left before we retire, and I am getting rather nervous that we might be making a big mistake by sticking with this advisor.
I’d really appreciate your advice on this because I would find it very awkward to broach this subject with him, especially as we have a good rapport with him and, silly as it sounds, I wouldn’t want him to feel bad! On the other hand, it IS our money! I would be very grateful to get your opinion on this.
Answer: For starters, a management fee of 1.13 per cent is not out of line, presuming he does not charge you for trades and is buying F-series mutual funds. The key question is the net return you are receiving. This should be on the reports you’re getting. If not, ask him for the net return for 2019, the average annual rate of return for the past five years, and the average annual return since you started doing business with him. He should have those numbers readily available. That will give you a much better insight into how you’re doing.
What about switching to the bank? For starters, a CIBC advisor cannot buy you stocks, ETFs, etc. A bank is not a brokerage and is limited in the number of products it can offer. Their advisor will be pushing mutual funds, especially CIBC’s own brand, which will come with a much higher management expense ratio than the 1.13 per cent you have been paying. The advisor will probably earn a commission on those sales. If you’re not paying one way, you’ll pay another.
So, I suggest your first step is a meeting with your present advisor. Since you have a good rapport with him, he should be willing to answer all your questions honestly. Then, if you wish, have a meeting with CIBC. Ask exactly what investment products would be available to you and how the advisor is paid. You’ll then have enough information to make an informed decision.
Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.
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