03 Jun 2020
Poland is hoping to benefit from difficulties caused by the chaotic nature of India's lockdown
03 Jun 2020 3:00am GMT
(Bloomberg) -- For the longest time, the only way to get exposure to China's real estate market, for mom and pop investors at least, was to buy a house.That's all set to change with the advent of real estate investment trusts.China kicked off a REIT trial in late April that will initially focus around pooling capital to fund infrastructure projects like highways and airports. If successful, the program may be expanded to include traditional real estate, exposing individual investors to a market Goldman Sachs Group Inc. estimates could one day be worth as much as $3 trillion.For retail investors, it would be a whole new world. A lack of investment options has meant Chinese families have around 78% of their wealth tied up in property, more than double the U.S., a 2019 study by Chengdu's Southwestern University of Finance and Economics showed. Less than 1% is invested in stocks.Authorities in Hainan in China's south said on Monday that the development of REITs would be supported and indicated that financing channels for rental properties may be expanded.REITs are like "owning a slice of the property and reaping a steady income from the rental, which is out of reach of most mom and pop investors," said Sigrid Zialcita, the Singapore-based chief executive officer of the Asia Pacific Real Estate Association Ltd. "Retail investors in China have had few investment opportunities like this before. REITs are less volatile than stocks, but investors can still enjoy growth from increased dividends or asset appreciation."Long Time ComingTalks about starting a REITs market in China have been ongoing since 2008 but never came to fruition on concerns they may further fuel home prices, which have risen exponentially over the last 20 years.The pilot program includes a number of rules to ensure prudence. Retail investors can only buy 16% of any one REIT's securities and cornerstone retail investors have to hold at least 20% of their investment for a minimum of five years. Institutional investors will control the rest.To prevent against funds being misused, REITs can only obtain leverage of up to 20% and any money borrowed has to be used for maintenance and renovation rather than acquisitions.Infrastructure assets must also have been operational for three years, and located in one of six designated economic zones, one of which includes the Greater Bay Area that links Guangdong, Hong Kong and Macau. The ability to generate stable cash flow is also a prerequisite.Safety First"For a brand new product, top policy makers are going to be paying substantial attention to financial stability and safety," said Stanley Ching, the head of real estate at Citic Capital Holdings Ltd. "When the government feels confident enough REITs won't flare up the property market, they may expand the trial."Until then, infrastructure-only REITs make sense for another reason -- they'll help get China's battered economy back on its feet.Encouraging equity fundraising for public projects like highways, bridges and business parks will alleviate the debt strain on local governments. Sinolink Securities Co. forecasts China will need to spend about 1.5 trillion yuan ($201 billion) on infrastructure this year to achieve economic expansion of between 5.5% and 6%."Ramping up infrastructure investments through REITs can propel economic growth and curb the debt risks faced by local governments," said Zuo Fei, a managing director in the investment banking division of China Merchants Securities Co.The potential scale of a new infrastructure REIT market is dizzying. Assuming only 1% of existing infrastructure projects are securitized, at least 1 trillion yuan will be released onto equities markets, according to a report last year by Peking University's Guanghua School of Management.The biggest obstacle is a legal one.In Asia, REITs are usually structured so that a trust or a fund holds the assets. But in China, trust products can only be sold to a maximum of 200 qualified investors, while mutual funds can only invest in stocks and bonds.The trial gets around this by allowing individual investors to buy shares in a mutual fund, which then invests in asset-backed securities that indirectly hold the infrastructure assets."It's an attempt to roll out a REIT framework without modifying existing laws," Citic Capital's Ching said. "It's the first step to a public REITs market and that's a breakthrough."(Updates with Hainan development in 5th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
03 Jun 2020 2:20am GMT
(Bloomberg) -- Two major Canadian wireless companies said they will build out their next-generation 5G wireless networks with equipment from European providers, sidelining China's Huawei Technologies Co.Montreal-based BCE Inc. said that Ericsson AB will provide the radio access network equipment -- the critical antennas and base stations -- for its 5G network. Telus Corp. said in a separate statement that it has selected Ericsson and Nokia Oyj "to support building" its network, without elaborating.Those announcements come ahead of a closely watched -- and long overdue -- decision by Prime Minister Justin Trudeau on whether to ban Huawei from participating in the nation's 5G infrastructure amid deeply troubled relations with Beijing. Huawei previously played a large role in Canadian wireless networks but has faced growing national security concerns from Western governments.BCE would still consider working with Huawei if the government allows their participation in 5G, the Canadian company said in an e-mailed response to questions.The Trump administration has lobbied allies to ban Huawei 5G, saying its equipment would make networks vulnerable to exploitation by the Chinese government. Despite that, the U.K. said in January it would allow Huawei a limited role. In recent days, Prime Minister Boris Johnson's government has backtracked, saying it seeks to reduce reliance on the company's technology and on China.Telus and BCE awarded Huawei its first major project in North America in 2008 -- a pivotal contract that helped cement the Chinese provider's reputation as a global player that could compete on quality. The deal paved the way for it to become a major supplier to all three of Canada's biggest telecom companies over the next decade.Stalling in OttawaThe Telus announcement comes as a particular surprise after Chief Financial Officer Doug French told the National Post in February that "we're going to launch 5G with Huawei out of the gate" by the end of the year.Telus spokeswoman Donna Ramirez didn't immediately respond to a question on whether the company's announcement still leaves room for Huawei to participate in its 5G rollout. Huawei said in an emailed statement it looks forward to the federal government completing its 5G review and making an evidence-based decision about its role in helping build Canada's next-generation wireless networks.Trudeau has stalled on whether to ban Huawei. Tensions between the two countries have been rising since Canadian authorities arrested Huawei CFO Meng Wanzhou on a U.S. handover request in late 2018. After her arrest, China put two Canadian citizens in jail, halted billions of dollars in Canadian imports and put two other Canadians on death row.The extradition proceedings against Meng, the eldest daughter of the company's billionaire founder, have pushed Canada's relationship with its second-biggest trading partner into its worst state in decades. Beijing has accused Canada of abetting a U.S.-led "political persecution" against a national champion.(Updates eighth paragraph with statement from Huawei)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
03 Jun 2020 1:36am GMT
02 Jun 2020
When looking at V-shaped recoveries, they hardly come more V-shaped than that of Tesla's (TSLA). Hitting all-time highs in February, then plummeting along with the rest of the market, the EV pioneer's fortunes appear to be speeding upwards yet again, as the swift recovery has led Tesla stock to a year-to-date gain of 115%.According to Wedbush analyst Daniel Ives, the moving parts are all falling into place for Tesla. The fact that Fremont is up and running again following the resolution of the Musk vs Alameda County quarrel combined with strong demand in China for Model 3 vehicles suggest a "solid May and June likely in the cards and clear momentum heading into 2H."That said, it is China and the attendant opportunity that is mostly on Ives' mind. The 5-star analyst believes the China growth story is "worth $300 per share to the stock."In a difficult pandemic-driven environment, Chinese demand for Model 3s remains "a ray of light" for Tesla, with the Shanghai-based Giga 3 factory seemingly on the path to deliver 100,000 Model 3 units in its first fully operational year.Ives argues there is increasing demand for electric vehicles in China, and maintains "EV penetration is set to ramp significantly over the next 12 to 18 months," with Tesla competing for market share supremacy along with several local and international rivals.Looking ahead, Ives said, "The Street will be closely monitoring demand trends across Europe and China over the coming month as the focus of investors shifts to a more normalized (depending on COVID) environment heading into year-end and 2021 and what this dynamic means for the long-term earnings trajectory going forward."At this point, however, Ives prefers to watch this bullish story play out from the sidelines. The analyst keeps a Neutral rating on TSLA, although the price target gets a significant bump - moving up from $600 to $800. Despite the increase, the target still indicates possible downside of 9%. (To watch Ives' track record, click here)Opinion on the Street regarding Musk & Co is almost evenly split. 9 Buys and Holds each, along with 10 Sells add up to a Hold consensus rating. However, it appears most believe Tesla has surged enough for now, as the average price target comes in at $633.14, and implies the analysts expect shares to drop by 28% over the next 12 months. (See Tesla stock analysis on TipRanks)To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a newly launched tool that unites all of TipRanks' equity insights.
02 Jun 2020 10:44pm GMT
Global Economy