Spain's Economic showed moderate growth at end of 2019 - Canada News Media
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Spain’s Economic showed moderate growth at end of 2019



MADRID (Reuters) – Indicators suggest the Spanish economy stabilized toward the end of 2019 after experiencing a summer slowdown, possibly linked to the uncertainty of Brexit, Spain’s Economy Minister Nadia Calvino said on Monday.

“In the fourth quarter of the year, in autumn and winter, there was some stabilization, including, perhaps moderate growth, or acceleration of growth,” Calvino told state broadcaster RTVE.

“Everything points to a growth of around 2% (in 2019),” she added.

(Reporting by Inti Landauro, writing by Ashifa Kassam)

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Turkish Deals Back in Play as Economy Rebounds, Stocks Rally – Financial Post



(Bloomberg) — Turkish bankers can look forward to more deals as gains in the nation’s stock market rekindles interest in mergers and acquisitions.

The country’s economy is poised to recover from almost zero growth in 2019 after a series of interest-rate cuts stoked demand for credit. A lull in political tensions between Washington and Ankara is also adding to the likelihood that more deals, including initial public offerings, may cross the finish line. Both KPMG International and Ernst & Young Global Ltd. expect M&A to increase about threefold in 2020.

The improved outlook comes after the value of takeovers and mergers in 2019 plunged to the lowest in 15 years and share sales slid to a decade low, according to data compiled by Bloomberg. The slump in deals followed a currency crisis that weighed on growth and pushed many companies to renegotiate their debt to avoid collapse.

Private-equity firms are also returning, according to Mustafa Bagriacik, JPMorgan Chase & Co.’s senior country officer for Turkey and Azerbaijan.

“It also evidences the improved outlook of Turkey internationally,” he said in an email. “Turkey continues to be resilient through the troughs, and investors are keen to realize opportunities.”

Still, regional instability could weigh on deals. President Recep Tayyip Erdogan’s administration is at loggerheads with Greece over offshore natural-gas reserves in the eastern Mediterranean, a dispute that’s now dragged in strife-torn Libya and Abu Dhabi. Turkey is also involved in the Syrian conflict.

Energy Deals

The country’s struggling energy companies may draw interest after the lira weakened quicker than producers could raise prices to repay foreign borrowings.

“Value investors with a longer-term investment horizon are continuing to look at Turkey as providing attractive distressed-asset plays, in particular energy,” said Jonathan Friedman, a partner at Wallbrook Advisory Ltd. in London. “Investors, however, are continuing to be concerned about a wobbly economy and political instability, both at home and in the region.”

Investor interest in Turkey will hold as long as geopolitical developments improve and Turkey’s economic-reform plan delivers more progress, said Ozge Gursoy Buyukavsar, head of corporate finance at EY’s Turkish unit.

The audit firm’s consultancy expects M&A deals to reach $8 billion from its estimates of $2.7 billion in 2019. KPMG predicts M&A could top $10 billion, from its estimates of $2.9 billion in deals last year, helped by stability in the lira and faster growth.

Some M&A deals may come from the sale of companies under receivership and held by a Turkish-government controlled fund, Buyukavsar said. Power plants owned by Turkey’s state-owned power utility Elektrik Uretim AS may be sold, while toll roads under the government’s build-operate-transfer plan could also be up for auction, he said.

“Infrastructure and export-driven sectors continue to be of interest to investors due to their reduced exposure to Turkish lira fluctuations and resilience to demand elasticity,” said Bagriacik of JPMorgan.

A bounce in equities may spur companies that put plans on hold to reconsider an IPO, he said. Turkey’s stocks benchmark has rallied 40% since dropping to a 2 1/2-year low in May last year, reaching an all-time high earlier this month — until fears over the outbreak of a deadly virus in China triggered a global sell-off.

Some Turkish deals are already in the works. Azerbaijan’s state-owned oil company mandated Credit Suisse Group AG and JPMorgan for an IPO of its Turkish business. Power-grid operator Bereket Enerji Uretim AS hired Goldman Sachs Group Inc., JPMorgan and Citigroup Inc. to offer shares in its renewable-energy unit, while Karadeniz Holding, an operator of electricity producing ships, is considering an IPO in London, people familiar with those plans said last year.

Istanbul-based brokerage BGC Partners forecasts $3.1 billion of IPOs between now and 2023, and $2.4 billion of secondary offerings through 2021, it said in an emailed note.

The window for M&A deals will be short because the improvement in equity markets could push valuation expectations higher, said Emre Hatem, director of investment banking and finance at Garanti BBVA in Istanbul.

The shares of members on the Borsa Istanbul 100 Index trade at a 42% valuation discount, as measured by multiples of their enterprise value — which excludes market capitalization and debt — to their estimated earnings before interest, taxes, depreciation and amortization.

“Almost all companies trade significantly below their peers in comparable markets and their historic levels,” Hatem said. “These low valuations, create a lot of high-return opportunities for international investors. The early entrants will be the ones to benefit most from the current reasonably low valuation levels.”

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These American brands have the biggest exposure to China's economy – CNN



“We are in an era of just-in-time delivery and minimal inventories, so in many cases it probably wouldn’t take long before shortages would show up in supply chains, and consumers might notice delays in product arrival,” William Reinsch, the Scholl chair for international business at the Center for Strategic and International Studies, told CNN Business.
He said that US companies with ties to Wuhan “should be worried.” However, with the ongoing tariffs and rising Chinese labor costs, US companies have recently been moving some manufacturing from China to other countries.
“That’s a long term trend that has been going on for some time, but it will make the effects of the virus less significant now than four or five years ago,” he said.
Still, some companies could feel the impact as the virus spreads. It has killed more than than 100 people and there are more than 4,500 confirmed cases in mainland China, according to health officials in the country. Dozens of others have been infected worldwide, including at least five confirmed cases in the United States.
US businesses with a major manufacturing presence in China could be affected if factories remain closed longer than the planned Lunar New Year shutdown. Beijing extended the holiday from January 30 to February 2 to try and prevent the spread of the virus.
Apple’s production of the iPhone could be hit hard, according to the Nikkei Asian Review. The report said suppliers are nervous they can’t meet Apple’s demand to increase production of the phone because of the coronavirus has spread to Hubei Province where some plants are located.
The company has plants elsewhere in China that make other iPhone parts, notably the Foxconn facilities in Shenzen, which is roughly 600 miles away from the epicenter of the disease.
Apple (AAPL) didn’t respond to CNN Business’ request for comment. But investors and analysts are likely looking for Apple CEO Tim Cook to address the situation on its earnings call Tuesday.
General Motors (GM) is another US company in Wuhan. The car company operates a manufacturing plant with GM’s Chinese partner SAIC and Dongfeng Motor Corporation, which is one of the country’s largest auto groups. The GM-SAIC plant in Wuhan has about 6,000 employees, about 10% of GM’s total work force in China.
GM previously told CNN Business that it is staying abreast of the development and advising employees who don’t feel well to not come to work. “The most important thing is to contain the virus – production is secondary to the health of the team and community,” said a GM spokesman.
The disruption is coming at a “critical” time for Tesla (TSLA), according to Dan Ives, an analyst at Wedbush Securities, as it ramps up production from its new factory in Shanghai. But, for now, Ives doesn’t predict “any major disruption on the horizon.”
Several well-known food companies, including Starbucks (SBUX), McDonald’s (MCD) and KFC have also limited operations in Hubei.
Nike (NKE) brought in $6.2 billion in revenue from the Greater China region in 2018, up 21% from the prior year compared to just 7% growth in North America. China has been Nike’s fastest growing market for the past two years.
Under Armour (UA) is another sportswear company with a heavy presence. While it does not break out revenue from China, its sales in Asia Pacific have grown faster than in other areas.

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New virus poses threat to fragile world economy



This should be peak season for a 12-room hotel near the train station in the New virusindustrial hub of Wuhan. The Chinese New Year usually brings in plenty of travellers and delivers profits of around $3,000 a month.

But the place is empty. Wuhan, the centre of a deadly viral outbreak, is on lockdown. “There is not a single customer,’’ said the hotel’s owner, who gave only his surname, Cui. He still has to pay rent and his utility bills. Instead of counting his earnings, he’s expecting to lose $1,500 a month.

The outbreak arrives at a bad time for Wuhan, China and the world economy.

China, with the world’s No. 2 economy, was decelerating even before the coronavirus hit.

And the world economy is coping with an unexpectedly sharp slowdown in No. 7 India, which prompted the International Monetary Fund last week to downgrade its outlook for global growth this year.

The coronavirus is drawing comparisons to the SARS outbreak, which paralyzed the economies of China and Hong Kong for weeks in 2003. But what happens in China carries a lot more weight these days: In 2003, China accounted for 4% of global output. Now its share is 16%, according to the World Bank.

“A growth slowdown in China could have sizable ripple effects across Asia and the rest of the world, given the size of China’s economy and its role as the key driver of global growth in recent years,” said Eswar Prasad, a Cornell University economist and former head of the International Monetary Fund’s China division.

No one knows exactly how the outbreak will play out or what its economic impact will be.

Authorities are still trying to better understand the new virus. It is from the coronavirus family, which also can cause the common cold as well as more serious illnesses such as SARS.

So far, China has confirmed more than 4,500 coronavirus cases and more than 100 deaths.

The Chinese government has locked down Wuhan and 16 other cities in Hubei province, isolating more than 50 million people. The United States and other countries prepared Tuesday to airlift their citizens out of Wuhan. The outbreak has brought every day business to a standstill and closed down such popular tourist attractions as Beijing’s former imperial palace, Shanghai Disneyland, Hong Kong Disneyland and the city’s Ocean Park.

The significant decline in travel has already caused United Airlines to suspend some flights to Beijing, Hong Kong and Shanghai, the airline said in a statement.

“It’s still too soon to measure what the impact is going to be from an economic perspective,’’ said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

The SARS experience offers some reason for economic optimism. That outbreak, centred in southern China, initially clobbered the Chinese economy. In the April-June quarter of 2003, China’s economic growth dropped to an annual rate of 9.1% from 11.1% the previous quarter, noted economists Tommy Wu and Priyanka Kishore of Oxford Economics. But as the health crisis subsided, growth picked back up, recovering to a 10% annual rate in the second half of the year.

“From what we know, it’s likely to be similar this time,’’ said Andy Rothman, investment strategist at Matthews Asia. “People shouldn’t get panicked that growth is going to slow sharply’’ over a sustained period.

Still, the Chinese economy isn’t the dynamo it was in the early and mid-2000s when growth routinely hit double digits.

The IMF expects China’s growth to drop from 6.1% in 2019, already the slowest since 1990, to 6% this year and 5.8% next. The slowdown reflects China’s difficult transition from fast but unsustainable growth built around often-wasteful investments to steadier but less striking growth built on consumer spending by the country’s growing middle class.

The Chinese economy has also been buffeted by a trade war with the United States. The two countries signed a truce earlier this month that was expected to provide some economic relief. Then the viral outbreak hit.

As part of the so-called Phase 1 deal, China agreed to increase purchases of U.S. products by $200 billion over this year and next. That goal sounded ambitious even before the viral outbreak isolated tens of millions of Chinese consumers and delivered a wallop to consumer and business confidence.

Rothman suspects the United States might give the Chinese a little leeway. “Both governments really want the deal to work,’’ he said. “Ïf it is clear that (Chinese purchases) are off to a slow start not because the Chinese government is not trying its best but because of the virus, the Trump administration is likely to be sympathetic.’’

There has been no immediate impact on China’s vast manufacturing industries because factories already were closed for the Lunar New Year holiday and weren’t due to reopen until this week or later.

“I think the first quarter looks like it will take quite a significant hit,” said Rajiv Biswas, chief Asia economist for IHS Markit. “This still is escalating, so it’s hard to talk about when this will be contained.”

Further delays in restarting production could send shock waves through Asian suppliers of components and exporters of iron ore, copper and other commodities as far away as Australia, Brazil and Africa.

Foreign suppliers usually see a surge in Chinese orders as factories restock after shutting down for 10 days or more during the holiday.

“The loss of economic output could be quite substantial, and that has consequences for the Asian manufacturing supply chain, because orders won’t come in the way people expect,” Biswas said.

The impact in other developing Asian countries might reduce their 2020 economic growth by 1.5 to 2 percentage points, according to a forecast by Edward Glossop of Capital Economics.

Growth in Asian emerging markets “will slow sharply in the first quarter of the year,” Glossop said in a report.

Japanese Economy Minister Yasutoshi Nishimura told reporters Tuesday that Japanese exports, production and corporate profits could be pinched by the new virus, stressing that he was closely monitoring the situation.

A more direct hit is already coming from the decline in tourist traffic from China. Nishimura said Chinese travellers usually account for about a third of tourists from abroad.

Chinese tourists to Japan tend to be relatively big spenders. The virus has hit right at the time when Chinese travel for the lunar new year.

Japan’s economy suffered from the SARS outbreak in 2003, but the damage was limited to several months. The big difference is that Japan has far more Chinese tourists these days.

Now “the impact on the Japanese economy would be far greater,” said Takahide Kiuchi, executive economist at Nomura Research Institute, while adding that much depends on how widespread the outbreak proves to be.

“There is hardly anything good that can be hoped for economically because of the new virus,” he said. Increased sales of masks and other protective gear, he noted, will hardly pick up the slack.


Wiseman reported from Washington, McDonald from Beijing and Kageyama from Tokyo. AP researcher Yu Bing in Beijing and AP Airlines Writer David Koenig in Dallas contributed to this report.

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