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Spain’s Economic showed moderate growth at end of 2019

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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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The coronavirus could be much worse for China's economy than SARS – CNN

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The virus outbreak escalated just before the new year, one of China’s most significant economic events. Chinese consumers spent more than 1 trillion yuan ($145 billion) last year on holiday shopping, dining, entertainment and travel, according to state news agency Xinhua.
Extensive travel restrictions and fears about the virus mean people aren’t spending as much this week. But the extended holiday — to February 2 nationwide and for another week beyond that in Shanghai and several provinces — will impact millions of people in other ways as government offices and schools remain closed.
How the coronavirus is already hurting global business
Major companies such as Tencent (TCEHY), Huawei and Alibaba (BABA), will feel the effects, too, as head offices remain shut. Tencent (TENC) has told its roughly 54,000 employees that it will be extending holidays until February 9.
Exactly how big the economic hit will be is hard to predict. China hasn’t come to a complete standstill — the Shanghai Stock Exchange is reopening on February 3. Grocery stores and food delivery services are still up and running, even in areas under lockdown.
ING economist Iris Pang said Wednesday that the outbreak would knock a modest 0.3 percentage points off China’s first quarter growth.
But Tommy Wu, analyst at Oxford Economics, said the impact could be worse than the SARS outbreak in 2003, given the coronavirus is spreading rapidly and coincides with the holiday travel rush. Economists at Nomura warned that the outbreak could knock more than two percentage points off growth in the first quarter — larger than the quarterly drop registered during SARS.
Patrick Perret-Green, an economist with research firm AdMacro, said the hit to China’s annual growth rate could be even more severe.
“There will be no quick recovery. China was growing strongly [during SARS], as was the rest of the world,” he said. “Now China and the global economy is like a patient on dialysis, and somebody just pulled an IV out.”

A big hit to growth

Before the outbreak escalated this month, the International Monetary Fund and the World Bank had forecast China’s annual economic growth to fall to about 6%, down from 6.1% in 2019.
Perret-Green said the outbreak and measures to contain it could push China’s 2020 GDP growth rate near levels last seen in 1990, when it was 3.9%, according to World Bank data.
The Wuhan virus is the last thing China's economy needs right nowThe Wuhan virus is the last thing China's economy needs right now
“Officially it may be closer to 4.5% and possibly the reality could be close to zero,” said Perret-Green, who suggested the government severely overstates its GDP figures to begin with.
Margaret Yang, an analyst at brokerage firm CMC Markets, said the “adverse economic impact is enormous.”
All sectors will likely feel the effects of the delay in getting back to work, she said in a research note Tuesday, singling out transportation, tourism, entertainment, retail and commercial property.
The Wuhan coronavirus has already killed 132 people, and infected over 6,000 others in China, but is not yet as lethal as the 2003 SARS outbreak. SARS had a roughly 10% fatality rate, compared to the estimated 3% for the coronavirus right now.
But the economic costs aren’t only about how deadly the virus is, according to Andrew Batson and Ernan Cui, analysts at research firm Gavekal Dragonomics.
“These costs are instead going to be determined by the measures China’s government takes to contain its spread — measures which have rapidly escalated to an unprecedented severity,” they wrote in a research note on Tuesday.
Travel and tourism will have an outsized effect, Batson and Cui said. They noted that the sector raked in 514 billion yuan ($74 billion) during the seven-day holiday in 2019, equivalent to 2% of first quarter GDP.

Travel industry suffering

There has already been a plunge in the number of trips made during the holiday. Liu Xiaoming, China’s vice minister for transport, told reporters on Sunday that the overall number of trips made across the country on the first day of the Lunar New Year fell nearly 30% from a year ago. Travel by plane and train fell more than 41%, he added.
Major travel companies, hotels and airlines are waiving cancellation fees and offering refunds through most of February. Some airlines are suspending services.
British Airways suspends all flights to China as coronavirus spreadsBritish Airways suspends all flights to China as coronavirus spreads
Meanwhile, major tourist spots including museums, Beijing’s Forbidden City and even Disney’s (DIS) parks in Shanghai and Hong Kong have shuttered their doors. Beijing and other cities across China also canceled Lunar New Year celebrations, trying to limit crowds.
“This will mean a permanent loss of revenue from tourist activities, as the canceled excursions are not going to be repeated after the holiday is over,” wrote Batson and Cui.
Even after the extended vacation ends, China won’t be returning to business as usual. Many people will likely remain cautious, staying indoors and avoiding crowded areas.
— CNN’s Vanessa Yung, Serenitie Wang and Yong Xiong contributed to this report.

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Bad timing: New virus poses threat to fragile world economy – CTV News

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This should be peak season for a 12-room hotel near the train station in the Chinese industrial hub of Wuhan. The Chinese New Year usually brings in plenty of travellers and delivers profits of around US$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. “If 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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Turkish Deals Back in Play as Economy Rebounds, Stocks Rally – Financial Post

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(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.”

Bloomberg.com

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