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UK manufacturing investment set to fall as recession looms

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Investment in British manufacturing is set to fall for the first time in nearly two years as companies start to cut spending as a recession looms next year.

Make UK, the trade body, said the balance of its members reporting an increase in investment intentions during the past three months of the year dropped to minus 5 per cent from plus 7 per cent. This was the first time in seven quarters, since the height of the coronavirus pandemic, the measure had turned negative.

The quarterly Make UK/BDO Manufacturing Outlook survey published on Monday also forecast output would fall 4.4 per cent this year, compared with a “very strong” 2021, and warned further declines would follow.

In its September forecast, Make UK had still anticipated growth of 0.6 per cent for the year and said the change in outlook highlighted “the extent to which conditions for the sector have weakened significantly, especially in the final quarter of the year”. It added that it expected a contraction of 3.2 per cent in 2023 as the UK entered recession.

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The balance of manufacturers reporting an increase in orders also fell sharply in the final quarter, from 15 per cent to 6 per cent, with the measure dropping to minus 2 per cent for the first three months of 2023.

The data will add further pressure on to the government to find ways to stimulate business investment, with companies across the country warning they will rein in spending as economic conditions worsen.

The decline also comes ahead of the end of the government’s tax incentives designed to boost business investment — the so-called super deduction tax break — next spring.

Manufacturers have been hit by higher costs, especially in the more energy-intensive industries, while many are still struggling with the costs and extra paperwork caused by Brexit.

The government has helped businesses with energy costs for six months, but business leaders warned that the cliff edge when this support ended in March could lead to widespread business failures if prices remained high. Meanwhile, with the UK and other parts of the world facing recession next year, companies are worried that demand for their products is also falling.

Make UK said that deteriorating economic conditions were exerting a “vice-like grip on the sector”, with increasing costs, tighter fiscal and monetary policy and weakening consumer demand “forming a perfect storm”.

The industry has grown frustrated with the lack of government efforts to help a crucial sector of the British economy, with no sign yet of a rumoured new industrial strategy or pro-growth measures to boost investment, such as new tax incentives.

Stephen Phipson, chief executive of Make UK, said that there was “simply no sugar-coating the outlook for next year and possibly beyond”.

He added: “The UK risks sleepwalking into an acceptance that little or no growth is the norm. Government needs to work with industry as a matter of urgency to deliver a long-term industrial strategy that has growth at national and regional levels at its heart.”

The government said it continued to work to strengthen the UK’s manufacturing industry”, pointing to tax incentives including the annual investment allowance and the super-deductor, adding: “Our Autumn Statement set out further measures to boost growth and productivity by investing in people, infrastructure and innovation.”

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Lithium Americas stock rises on GM’s $650 million equity investment – MarketWatch

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Lithium Americas Corp.
LAC,
+13.19%

stock was up 9.2% in premarket trading Tuesday after it said General Motors Co.
GM,
+8.14%

agreed to invest $650 million in the company to help develop Nevada’s Thacker Pass mine, the largest known lithium source in the U.S. Lithium Americas said the project would create 1,000 jobs in construction and 500 in operations. It would produce lithium for up to 1 million electric vehicles (EVs) a year. Lithium from Thacker Pass will be used in GM’s proprietary batteries for its EVs. “Direct sourcing critical EV raw materials and components from suppliers in North America and free-trade-agreement countries helps make our supply chain more secure, helps us manage cell costs, and creates jobs,” GM CEO Mary Barra said. Thacker Pass is scheduled to go into operation in the second half of 2026, the companies said.

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Investment funds that are moving to defensive positions, and some that are not – The Globe and Mail

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What are we looking for?

ETFs and DIY mutual funds that made notable changes to their defensive-sector exposure over 2022.

The screen

The year is off to a great start for equity investors, with most equity indexes posting single-digit gains on a year-to-date basis, perhaps fuelled by investors’ reinvigorated confidence that the world’s central banks have inflation under control. That said, a new economic environment of higher interest rates might prompt some investors to have a look at their sector exposures, perhaps allocating more to defensive sectors for risk-reduction purposes, or to more cyclical sectors if they’re bullish on market prospects. To help identify potential candidates, I thought to analyze funds that have made noticeable moves over the course of last year. To start with, I screened the Morningstar Direct database for Canadian-domiciled equity ETFs and DIY mutual funds for those that have a reasonable track record, denoted by their Morningstar Rating for Funds or “star” rating of three stars or better, implying that the initial universe performed at least as well as category peers.

I then looked at the sector allocations of each fund as they appeared at the end of 2022 and 2021. Specifically, I used Morningstar’s “super-sector” definitions to determine which funds have the largest changes in exposure to defensive sectors. Recall that Morningstar’s classification structure for stocks divides global companies into three “super sectors”: (1) cyclicals, which include basic materials, consumer cyclical, financial services and real estate stocks; (2) defensive, which includes consumer defensive, health care and utilities stocks; and finally (3) sensitive, which includes communications services, energy, industrials and technology companies. I used the change in exposure to the defensive sector over the 2022 calendar year as the sole metric to rank the list of three-star-or-better funds.

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What we found

20 funds moving into, and away from defensive sectors

Name Ticker Morningstar Category Annual Report Management Expense Ratio (MER) Morningstar Rating for Funds Total Ret YTD (%) Total Ret 1 Yr (%) Total Ret Annlzd 3 Yr (%) Total Ret Annlzd 5 Yr (%) Defensive Supersector (12M % Change) Equity Econ Super Sector Defensive % (Net) 2022-12 Equity Econ Super Sector Defensive % (Net) 2021-12 Sensitive Supersector (12M % Change) Equity Econ Super Sector Sensitive % (Net) 2022-12 Equity Econ Super Sector Sensitive % (Net) 2021-12 Cyclical Supersector (12M % Change) Equity Econ Super Sector Cyclical % (Net) 2022-12 Equity Econ Super Sector Cyclical % (Net) 2021-12
Funds Moving to Defensive Sectors:
Fidelity US Momentum ETF FCMO-T US Equity 0.32 0.3 -1.7 41.7 48.4 6.7 -30.1 31.7 61.8 -11.8 19.6 31.4
Invesco S&P 500 Momentum ETF CAD MOM-NE US Equity 0.53 2 -1.0 4.0 1.6 3.5 38.3 49.3 10.9 -11.1 36.9 48.0 -27.8 12.9 40.7
iShares MSCI USA Momentum Ftr ETF XMTM-T US Equity 0.32 3 -1.1 -0.9 4.9 29.9 46.2 16.3 -13.2 36.8 50.0 -16.5 16.8 33.3
Purpose Global Innovators ETF PINV-T North American Equity 1.23 1 4.0 -24.7 -3.8 28.8 43.3 14.5 -28.4 37.1 65.5 -5.5 4.6 10.1
CI Munro Global Growth Equity ETF CMGG-T Global Equity 1.06 3.5 -4.7 22.6 38.4 15.8 -18.4 34.7 53.1 -6.7 21.8 28.5
CI Global Climate Leaders ETF C$ CLML-T Global Equity 0.93 1.4 -3.6 21.5 39.6 18.0 -8.3 43.8 52.1 -16.4 9.5 25.9
SmartBe U.S. Quantitative Momentum ETF SBQM-NE US Equity 0.99 1.3 12.2 18.6 30.1 11.6 18.5 58.3 39.8 -36.7 11.3 48.0
Fidelity International Low Vol ETF FCIL-T International Equity 0.48 3 2.4 -1.3 -0.7 16.7 50.4 33.7 -0.4 23.8 24.2 -16.7 24.8 41.4
CI WisdomTree Intl Qual DivGrETF IQD-T International Equity 0.58 5 6.6 0.7 5.6 6.2 16.6 42.1 25.5 -4.2 30.7 34.9 -11.9 27.0 39.0
SmartBe Canadian Quantitative Mmntm ETF SBCM-NE Canadian Equity 0.08 2.4 1.7 15.1 20.3 5.2 9.4 48.4 39.0 -24.4 30.9 55.2
Funds Moving away from Defensive Sectors:
Leith Wheeler Intl Equity Plus Series B International Equity 1.59 2 6.3 -1.9 1.0 -0.8 -12.0 15.1 27.1 5.2 25.9 20.8 12.7 30.1 17.4
Invesco S&P 500 Hi Div Low Vol ETF CAD UHD-NE US Equity 0.39 2 1.6 10.2 5.4 6.1 -12.1 40.3 52.4 -3.6 22.3 25.8 16.3 36.9 20.6
Beutel Goodman North American Focus Eq D Canadian Focused Equity 1.49 4 4.4 4.8 8.7 7.2 -12.3 18.4 30.7 11.5 34.9 23.4 0.1 44.2 44.1
Fidelity US Value ETF FCUV-T US Equity 0.36 6.0 12.2 -12.9 18.3 31.3 7.4 46.4 39.0 4.6 34.2 29.6
Fidelity US Value Currency Neutral ETF FCVH-T US Equity 0.39 7.5 5.1 -13.0 18.3 31.3 7.3 46.2 39.0 5.2 34.8 29.6
Horizons NASDAQ-100 Cov Cll ETF QQCC-T International Equity 0.85 1 6.7 -4.1 0.6 -1.1 -16.2 15.6 31.8 36.8 68.7 32.0 -19.2 15.2 34.5
TD Q Canadian Dividend ETF TQCD-T Canadian Dividend & Income Equity 0.39 1 7.4 9.3 5.5 -16.7 11.5 28.2 6.6 40.9 34.4 10.3 47.1 36.8
Invesco S&P GlbexCndHiDivLowVol ETF CAD GHD-NE Global Equity 0.67 2 4.3 6.3 1.5 3.2 -18.8 33.3 52.1 5.8 22.1 16.3 11.5 39.0 27.5
First Trust Morningstar Div Lrs ETF CADH FDL-T US Equity 0.66 3.2 8.3 11.3 7.8 -19.4 31.1 50.5 9.4 45.0 35.7 10.7 22.1 11.4
Guardian Fundamental All Country Eq ETF GGAC-T Global Equity 1.05 7.7 2.4 -25.2 2.1 27.4 -20.6 12.0 32.6 -23.2 13.9 37.1

Source: Morningstar Direct | Data as of January 27, 2023

The accompanying table includes 10 funds that have shifted their exposure toward defensive sectors the most, and the 10 funds that have shifted the furthest away from defensive sectors. The table also displays fees, trailing performance, ratings and inception dates. It is worthwhile noting that the three funds that have moved most into defensive sectors (XMTM-T, FCIL-T and IQD-T) are “smart beta” products, which are rules-based in nature and do not follow the discretion of a portfolio manager. Interestingly, the three funds are exposed to quite different factors. Also noted is the fact that several smart beta products that look for exposure to dividends (such as FCUD-T, XHU-T and VIDY-T), have shifted away from defensive sectors, while RBC’s actively managed mutual funds have increased their exposure to defensive sectors.

This article does not constitute financial advice. Investors are encouraged to conduct their own independent research before purchasing any of the investments listed here.

Ian Tam, CFA, is director of investment research for Morningstar Canada.

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CPP Investments Anchors New IndoSpace Fund with US$205 Million Investment – Yahoo Canada Finance

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MUMBAI, India, Jan. 30, 2023 /CNW/ – Canada Pension Plan Investment Board (CPP Investments) today announced an investment of US$205 million as an anchor investor in IndoSpace‘s new real estate fund. IndoSpace is a leading real estate company in India. The investment marks the first close for IndoSpace Logistics Parks IV (ILP IV), the company’s fourth development vehicle, targeting US$600 million of total equity commitments.

Image of sites (CNW Group/Canada Pension Plan Investment Board)

Image of sites (CNW Group/Canada Pension Plan Investment Board)

This is the latest venture between CPP Investments and IndoSpace. The first joint venture, IndoSpace Core, was established in 2017 and now owns the largest portfolio of stabilized modern logistics assets in India. CPP Investments has also invested in ILP III. Following the investment in ILP IV, the partnership will exceed US$1 billion in assets.

ILP IV will add an additional 25-30 million square feet to the IndoSpace portfolio, furthering IndoSpace’s leading position in the Indian market. ILP IV will focus on India’s largest logistics real estate markets: Ahmedabad, Bangalore, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, and Pune. The establishment of ILP IV follows on from the first three development funds, which have a combined total of 56 million square feet of modern logistics real estate in India.

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Hari Krishna V, Managing Director, Head of Real Estate India, CPP Investments, said, “Over the past few years, we have made numerous investments in India’s industrial space, where we see strong demand as the manufacturing sector continues to grow and the e-commerce sector matures. We are pleased to be working with our longstanding partner IndoSpace to further capitalize on opportunities in this space and believe this investment will deliver strong risk adjusted returns for CPP contributors and beneficiaries.”

Brian Oravec, Managing Partner and CEO, IndoSpace Capital Asia, said, “We are excited to extend our successful partnership with CPP Investments. CPP Investments’ commitment to ILP IV is a testament to IndoSpace’s leadership in the industrial and logistics real estate space in India. ILP IV will allow us to continue to expand our unique national network to better serve our customers. Industrial and logistics infrastructure is a key enabler of economic growth. To meet India’s aim of becoming a US$5 trillion economy by 2025, IndoSpace is excited to continue to be one of India’s key infrastructure creators.”

About CPP Investments

Canada Pension Plan Investment Board (CPP InvestmentsTM) is a professional investment management organization that manages the Fund in the best interest of the 21 million contributors and beneficiaries of the Canada Pension Plan. To build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. As per September 30, 2022, the Fund totalled C$529 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedInFacebook or Twitter.

About IndoSpace

IndoSpace (www.indospace.in) is the largest investor, developer, and operator of grade A industrial and logistics real estate in India. IndoSpace has the largest national network of 50 logistics parks with 56 million square feet delivered/under development across 10 cities. With India’s largest and most experienced industrial real estate team, IndoSpace continues to lead the development of key logistics infrastructure for India’s economic growth. For more information, visit www.indospace.in and follow us on LinkedIn, Twitter, and Facebook.

CPP Investments logo (CNW Group/Canada Pension Plan Investment Board)CPP Investments logo (CNW Group/Canada Pension Plan Investment Board)

CPP Investments logo (CNW Group/Canada Pension Plan Investment Board)

IndoSpace logo (CNW Group/Canada Pension Plan Investment Board)IndoSpace logo (CNW Group/Canada Pension Plan Investment Board)

IndoSpace logo (CNW Group/Canada Pension Plan Investment Board)

SOURCE Canada Pension Plan Investment Board

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