Ultra-rich the driving force in mega property deals

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Ultra-wealthy individuals are becoming an increasingly influential force in the world of real estate, acting as a critical source of capital for big-ticket deals in the sector, according to a new report by real estate services firm Savills and wealth intelligence provider Wealth-X.

“Global real estate is mostly residential and held by occupiers, but private owners are becoming more important in the world of traded investable property,” said Yolande Barnes, director, World Research at Savills.

“Since the `North Atlantic debt crisis` of 2008, sovereign wealth funds, wealth management companies, private banks and family offices have stepped into the property deals that corporate bankers have deserted,” she added.

In the world`s leading cities, the willingness of private wealth to take the place of debt finance or to take a higher-risk development position often determines whether a deal goes through or is mothballed, Barnes said.

Of the USD 250 trillion global real estate industry – 72 percent or USD 180 trillion is owner-occupied residential property, while the remaining 28 percent is investable and regularly traded.

The most regularly traded are commercial properties – retail, office and industrial – which are increasingly being bought by private vehicles and funds acting for high-net-worth individuals, family or consortia.

Thirty-five percent or 6,200 of global deals above USD 10 million in 2012 were only possible because of private funding, according to Savills.

“In recent years there has been a tendency for ultra-high net worth individuals [UHNWIs] to focus on `safe haven`, trophy properties for capital growth and wealth preservation. In future, we anticipate that some will begin to seek more productive, long-term income-producing positions,” Barnes said, noting that the best income returns are often found outside prime areas and in lower grade premises.

 “UHNWIs will be competing more directly with institutional investors in future but, being more opportunistic and less constrained by formal criteria, are more likely to become pathfinders and pioneers than corporate investors are,” she said.

For a pension fund or investment manager, the decision to invest in a property is often based on formal valuation methods that tend to look at annual performance and conventional measures of risk, which a private individual may eschew in favor of a longer-term view.

According to Savills, offices continue to dominate the large deals followed by retail property – except in the Americas where residential apartments in purpose built blocks designed for letting are favored ahead of retail real estate. Industrial units and hotels, meanwhile, represent small asset allocations.

-By CNBC`s Ansuya Harjani. Follow her on Twitter: @Ansuya_H
Copyright 2011 cnbc.com

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Global economy at a turning point: World Bank

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Global growth is set to accelerate in 2014 as advanced economies turn a corner five years after the global financial crisis, said the World Bank.

Growth is projected to strengthen to 3.2 percent this year, 3.4 percent in 2015, and 3.6 percent in 2016 – up from 2.4 percent in 2013.

“Most of the acceleration is expected to come from high-income countries, as the drag on growth from fiscal consolidation and policy uncertainty eases and private sector recoveries gain firmer footing,” the World Bank wrote in its newly-released Global Economic Prospects report on Wednesday.

Stronger growth and increased demand from developed nations will be an important tailwind for developing countries and should help compensate for the impending tightening of financial conditions, the Washington-based development bank said.

Growth in high-income countries is forecast to quicken to 2.2 percent this year from 1.3 percent in 2013. Meanwhile, growth in developing countries is estimated to pick up modestly to 5.3 percent from 4.8 percent.

The bank says the withdrawal of quantitative easing and corresponding increase in global interest rates is expected to weigh only modestly on investment and growth in developing countries as capital costs rise and capital flows moderate in line with a global portfolio rebalancing.

However, if a tapering of the Federal Reserve`s asset purchase program is met with an abrupt market adjustment, capital flows could decline sharply, placing renewed stress on vulnerable developing economies, it warned. “In a scenario where long-term interest rates rise rapidly by 100 basis points, capital inflows could decline by as much as 50 percent for several quarters,” it said.

While major tail-risks have subsided, fiscal policy uncertainty in the United States, a protracted recovery in the euro zone, and possible set-backs in China`s restructuring continue to pose risks to global outlook.

A successful rebalancing of the Chinese economy from investment-led to consumption-driven presents a “formidable challenge.”

An involuntary and abrupt decline in investment rates could have a significant impact on growth in the world`s number two economy, and knock-on effects in the region and among economies with close trading linkages including commodity producers, the World Bank said.

Nevertheless, it expects growth of 7.7 percent for the mainland economy in 2014, steady from an expected 7.7 percent last year.

-By CNBC`s Ansuya Harjani. Follow her on Twitter: @Ansuya_H

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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Apple-China Mobile deal a ‘watershed’ moment: Tim Cook

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A deal to sell iPhones on China Mobile`s vast network is a “watershed moment,” Apple CEO Tim Cook told CNBC on Wednesday.

China Mobile will start selling iPhones in China this Friday. The premium 5S model 16G will be priced at 5,288 yuan, or about USD 874, said the world`s largest mobile company.

Apple and China Mobile announced a long-awaited deal last month, with access to China Mobile`s network of an estimated 760 million subscribers seen as a crucial next step for Apple.

“This is a watershed moment,” said Cook, who is in Beijing for Friday`s launch. He referred to China Mobile as a great cellphone firm with a “very fast network.”

China Mobile said it did not have exact sales estimates. The firm said as of January 13, it had received 1.2 million pre-orders or 60,000 per day since December 25.

The mobile phone carrier said it was not releasing details of subsidies, which will be released with its annual results in March.

The deal with China Mobile means that the iPhone will now be available through all state-run telecom carriers in China, home to the world`s biggest population and a growing class of consumers.

The two latest iPhones have been sold by rivals China Unicom and China Telecom since they were launched last year. Both firms have trimmed contract prices for the iPhone to keep existing customers and tempt new ones away from China Mobile, according to media reports.

While Apple gets access to China`s Mobile`s vast network of customers, the tech firm also faces stiff competition from the like of Samsung and Lenovo.

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Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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How 2014 could be quite different from 2013

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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For many analysts the year ahead could be like the one just past with global equity markets gaining at the expense of bonds as the global economy gains momentum.

And while investors should “stay the course” this year, there are some important reasons why 2014 will be different from last year, KKR`s global macro and asset allocation team said in its 2014 outlook report on Tuesday.

For starters, KKR said that while it maintained an overweight position towards equity markets in the developed world and a “massive” underweight position in government bonds, it expected stock markets in the US, Europe and Japan to have a bumpier ride this year with a correction along the way.

Indeed, after a stellar 2013 major stock markets appear to be on the back foot amid a mixed start to the US earnings season and Friday`s soft US jobs report.

The blue-chip Dow Jones Industrial Average, which hit a record high last year, suffered a triple-digit loss on Monday. Japan`s Nikkei stock index, the darling of world equity markets last year with a surge of almost 57 percent, is down almost 5 percent since the start of the year.

“There are a few strikes against the [stock] market but I would argue only in the short-term,” Liz Ann Sonders, senior vice president and chief investment strategist at Charles Schwab told CNBC Asia`s “Squawk Box.”

“Sentiment was stretched towards the end of the year. It`s an election year in the States and when you have a four-year presidential cycle, there are some pretty nasty corrections within those,” she added.

Divergent EMs

KKR strategists added that while emerging markets were likely to lag their developed peers this year, as they did last year, investors should expect some differentiation within emerging market stocks in 2014.

“We finally expect some differentiation in EM [emerging market] equities, which we believe could allow asset allocators to gain a performance edge. This was not the case in 2013 as essentially all EM currencies and equities generally lagged across the board,” they said in the report.

Currencies and stock markets in South Korea and Mexico are likely to perform well this year, KKR said.

“We also think China could perform better in 2014, which represents a notable change in thinking,” it added.

China`s benchmark Shanghai Composite stock index was a notable underperformer last year, even as other global stock markets rallied thanks to a brighter economic outlook.

Worries that a resumption of initial public offerings will divert funds from existing shares have hurt sentiment in recent weeks, with the stock market hitting a five-month low this week.

Another change KKR expected was in the US dollar, which rallied last year against emerging market and commodity currencies but not European ones such as the euro. Europe`s single currency rose about four percent against the dollar in 2013. This was likely to change in the year ahead, said KKR.

“With stronger US growth ahead of us-and government shutdowns behind us-we think that the dollar rally will now likely include various European currencies,” it said.

– By CNBC.Com`s Dhara Ranasinghe; @DharaCNBC

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Dollar bulls: Time to pack up and go home?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The US dollar has taken a beating in the aftermath of last week`s much softer-than-anticipated non-farm payrolls report, dealing a blow to those betting on a stellar year for the greenback.

A dollar sell-off that began on Friday after news that the US economy created 74,000 new jobs last month versus expectations for a 200,000 gain extended into Monday, with the greenback tumbling to one-month lows against the Japanese yen and Australian dollar.

China`s yuan meanwhile hit a record high at 6.0415 per dollar on Tuesday.

“Certainly, it [the dollar move] is a very grave challenge for the dollar bulls,” said Sean Callow, senior currency strategist at Westpac Bank in Sydney.

“It`s a definite worry if you`re bullish on the dollar because there`s been no shortage of economists coming out to explain that the December payrolls report was impacted by special factors and could be reversed next month,” Callow said. “They could be right, yet the money is not being placed to back that call.”

Up until Friday`s data, upbeat economic news and expectations for a scaling back of the Federal Reserve`s monetary stimulus had sparked broad-based gains in the US currency.

Take a look at the latest positioning data in the foreign exchange market. Currency speculators lifted their bets in favor of the dollar in the week to January 7 (before Friday`s jobs data) to their largest amount in four months, data from the Commodity Futures Trading Commission on Friday showed.

The value of long-net positions on the dollar effectively bets on the greenback rising, standing at USD 21.11 billion compared with USD 17.5 billion in the week before.

It now appears that those bets are being rapidly unwound as investors reassess the outlook for the US economy and monetary policy.

“Disappointing NFP [non-farm payrolls] on Friday will probably dull dollar bulls for now as aggressive bets for hastened “taper” have taken a backseat while fresh economic evidence is watched,” Mizuho Corporate Bank said in a note Monday.

The dollar index, which measures the greenback`s value against other major currencies, traded at about 80.61 on Tuesday. That`s down almost 1 percent from a seven-week peak hit last week.

In its `Client FX Flow Monitor` released on Tuesday, Credit Agricole said that asset managers favored selling the dollar.

“This may be related to more unstable risk sentiment to the detriment of interest in buying US stocks. Going forward, we expect such flows to reverse on the back of stabilizing US growth expectations,” the report said.

Callow said that although many investors would see the pull-back in the dollar as a buying opportunity, Westpac was taking a more bearish approach.

“We`re starting the year with a below consensus forecast on the US economy, which we think will be lucky to get to 2 percent growth this year,” he said. “That`s one reason why our base case is for dollar/yen to move to 99-100 yen later in the year, which is in sharp contrast to most.”

A move to 100 yen would imply a fall of just over 3 percent from current dollar/yen levels around 103.34.

– By CNBC.Com`s Dhara Ranasinghe; @DharaCNBC

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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US no longer among top 10 for economic freedom

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The United States is no longer among the world’s top 10 nations in terms of economic freedom, according to a newly published index.

The world’s largest economy slipped two notches into the 12th position in the 2014 Index of Economic Freedom by think tank Heritage Foundation and the Wall Street Journal, released Tuesday, registering its seventh consecutive decline.

The index evaluates countries in four broad areas: rule of law; regulatory efficiency; limited government; and open markets.

Read more: Autos to lead US economic growth in 2014: CEOs

“The overall economic policy direction of the United States in recent years has involved substantial growth in the size and scope of government, accelerating the erosion of economic freedom and contributing directly to America’s fall from the top 10 freest economies,” a report accompanying the index said.

 “The absence of meaningful fiscal reform has weakened the government’s balance sheet and led to the explosive growth of government debt. The increasing cronyism that has accompanied the growth of government has undermined the rule of law, further eroding America’s economic freedom,” it added.

In addition, costly regulations in areas like finance, health care and the environment have curtailed economic freedom in the country, which is at its second lowest level in the 20-year history of the Index.

“These have injected uncertainty into business decision-making that has slowed job creation and hiring and hurt economic recovery and growth,” the report said.

Read more: Recovering economy may rein in bull market: Mavens

The world’s freest economy is…

While the U.S.’s economic freedom is deteriorating, the global trend is more positive, with much of the momentum lost during the past five years being regained.

The world average score of 60.3 is seven-tenths of a point above the 2013 average, and the highest average in the two-decade history of the Index.

Asian financial capital Hong Kong maintained its title as the world’s freest economy for the twentieth consecutive year.

Read more: Biggest Risk to Asia’s Economy? Not What You Think

“Creation of a new company, the level of taxation, the ability of the lowest quintile to rise up, is better in Hong Kong than anywhere else,” Ed Feulner, founder and chairman of the Asian Studies Center, The Heritage Foundation told CNBC Asia’s Squawk Box.

 Meantime, Singapore, Australia, Switzerland, New Zealand and Canada placed in second through sixth place, respectively. The world’s most-improved country is Burma thanks to improvements in its investment, business and labor freedom scores.

Finally, and not surprisingly, the hermit kingdom, North Korea has retained its position as the least free economy.

“North Korea may be attempting to open its economy slightly by encouraging limited foreign direct investment, but the dominant military establishment and ongoing leadership transition make any near-term substantial changes unlikely. Normal foreign trade is minimal, with China and South Korea being the most important trading partners,” the report said.

—By CNBC’s Ansuya Harjani. Follow her on Twitter: @Ansuya_H

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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Gold to tank in 2014: Goldman Sachs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Bad news for “gold-bugs”—bullion’s current beginning-of-the-year rally will not only lose steam, but prices could drop sharply by the end of 2014, according to Goldman Sachs’ Jeffrey Currie.

Currie, Goldman’s head of commodities research, told CNBC on Monday he had an end-of-year price target of USD 1,050 per ounce for gold, a 16 percent drop based from current prices of USD 1,251. The main culprit? Economic recovery.

“Our view there really is driven by the expectation of the U.S. economy reaching escape velocity,” Currie said on “Squawk on the Street.” “Essentially when you think about a short on gold … it’s essentially just a bet on a substantial recovery in the US economy.”

(Read more: Gold inches off 1-month high as rally evaporates)

Gold prices ballooned in the years since the 2008 financial crisis, driving prices to record highs thanks to ultra-low interest rates from the Federal Reserve’s economic stimulus programs. Prices dropped last year amid fears the Fed would scale down those programs earlier than expected, but a weaker-than-expected December employment report re-ignited interest in gold last week.

Currie said gold still worked as a hedge against inflation; he just doesn’t see any strong inflationary pressures in the next few years. He said once the economic recovery picks up more momentum, inflation would follow and gold may become attractive again. Gold’s early 2014 rally won’t last, he said.

(Read more: ‘Lofty’ market ripe for at least 10% drop: Goldman)

“I get it all the time—’Why are you bearish on gold when you expect the U.S. economy to recover?'” Currie said. “You have to think about it in different phases of the business cycle.”

(Read more: Gold jumps after weak US jobs report)

Other commodities Currie expects to underperform include beans and copper. Currie remains unwilling to make a big bet against oil because of disruptions in Libya and Iran. Investors continued to move away from commodity-intensive emerging markets and into developed economies, a trend that affects most commodities outside gold, he said.

(Read more: Fight in Iraq has oil traders holding their breath)

“They’re all driven by the same theme, rotation away from emerging markets and toward developed markets,” Currie told CNBC.

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Thai turmoil, India data take spotlight this week

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Focus in Asia this week is likely to turn to political turmoil in Thailand and inflation data out of India, with China taking a back seat for the time being.

Hong Kong`s Chief Executive Leung Chun-ying delivers a key policy address on Wednesday, while Australia releases employment data for December on Thursday.

The outlook for US monetary policy could also set the tone for trade in regional markets after Friday`s key non-farm payrolls report showed the US economy created 74,000 new jobs in December, below expectations of 200,000.

In Southeast Asia politics dominate, with another rally in Thailand`s capital city Bangkok due to take place on Monday.

Protestors are vowing to “shut down” Bangkok in a two-month-old campaign to oust Prime Minister Yingluck Shinawatra.

Thailand`s economy has weathered several bouts of political instability over the past decade, but persistent turmoil could damage the country`s long-term growth prospects, analysts say.

“Three things could now happen in Thailand,” Paul Gambles, managing partner at MBMG International, told CNBC Asia`s on Monday. “1) There could be a negotiated settlement, which is unlikely. 2) Either side backs down, which is unlikely or 3) Something kicks off, we get violence and the army steps in.”

India`s consumer price index (CPI) is due out later on Monday, followed on Tuesday by the release of the wholesale price index (WPI) – two indicators that could shed some light on whether interest rates in Asia`s third biggest economy are likely to rise again.

Economists polled by Reuters forecast a 9.92 percent rise in the December CPI from a year earlier, slowing from an 11.2 percent increase in November.

The WPI, an inflation gauge, closely followed by the Reserve Bank of India (RBI), is estimated to rise 7.15 percent in December on-year compared with a 7.5 percent increase a month earlier.

“In India, CPI and WPI will be closely watched, with signs of easing food inflation likely to boost rupee gains further,” analysts at Mizuho Corporate Bank said in a note. “But, the RBI will probably not find enough consolation in inflation data to capitulate on an underlying tightening bias just yet.”

The RBI last month kept its key interest rate unchanged at 7.75, defying expectations for a hike to curb inflation. It lifted rates in September and October.

China`s December foreign direct investment data is due out on Wednesday, but there`s little else in the way of big economic news from Asia`s largest economy, with focus on fourth quarter economic growth data due next week.

There`s also no major economic data from Japan this week, while in Australia local markets await the release of the latest jobs data.

– By CNBC.Com`s Dhara Ranasinghe; @DharaCNBC

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Is India’s recovery already over?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India does not appear to have much wind in its sails at the start of 2014 if the recent bout of disappointing economic data is anything to go by, which is raising doubts over a sustained recovery in Asia`s third-largest economy.

Industrial production unexpectedly contracted for the second consecutive month in November, falling 2.1 percent on-year, reflecting recessionary conditions in the country`s industrial sector. Meanwhile, export growth – a bright spot in recent months – decelerated to a mere 3.5 percent on year in December, down from a recent high of 13 percent in August.

Robert Prior-Wandesforde director of Asian economics research at Credit Suisse says while it`s tempting to be bearish about growth expectations for the December quarter and beyond, he`s not prepared to throw in the towel yet.

“Agricultural output growth almost certainly bounced back strongly in the final three months of the calendar year. Meanwhile, services growth should also benefit from a favorable base effect and improved financial market conditions,” Prior-Wandesforde, who forecasts growth of 5.2 percent in the final quarter of 2013, wrote in a note on Monday.

India`s economy began a feeble recovery in the July-September period, expanding 4.8 percent – a touch faster than the 4.7 percent growth in the previous three months. The gross domestic product (GDP) data for December quarter is due on February 28.

Sonal Varma, chief India economist at Nomura says recent data are exaggerating the growth slump, citing the industrial production reading that was distorted by a loss in working days owing to the festival season.

“The slowdown in the industrial sector is coming to an end. But we expect a prolonged bottoming out process as there are no visible triggers for an up-cycle at this stage,” said Varma, who forecasts 4.6 percent growth for the December quarter.

Varma expects growth will remain steady in a 4.5-5 percent range for the foreseeable future as stronger rural and external demand offsets impending cuts in fiscal spending as the government attempts to meet its ambitious fiscal deficit target of 4.8 percent of GDP.

Another growth driver will be a pickup in investment activity in areas such as power, telecom, roads, and ports, according to Taimur Baig chief economist, Asia at Deutsche Bank. The Cabinet Committee on Investments has cleared a large number of projects in 2013 amounting to $64 billion, the impact of which is likely to be felt from this year onward, he said.

Additionally, from a monetary policy perspective, Baig says an anemic industrial sector coupled with easing food inflation in December, will likely lead to a pause in the Reserve Bank of India`s tightening cycle – a positive for growth.

“Given the latest data, we think the RBI may just be able to justify no further policy tightening in January. Beyond January, the ground may well be set for a prolonged pause, in our view, with interest rate cuts taking place in the second half of the calendar year,” he said.

India`s central bank has raised interest rates twice since September 2013 in an effort to combat stubborn price pressures dogging the economy.

-By CNBC`s Ansuya Harjani. Follow her on Twitter: @Ansuya_H 

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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2014 a ‘litmus test’ for Australia: Goldman

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Australia – often referred to as the “lucky country” for its wealth of natural resources – will face a litmus test this year as the economy continues to transition from its reliance on commodities towards broader-based growth, Goldman Sachs said.

“2014 will be the litmus test for the Australian economy. Hopes appear high that the asset price gains of 2013 will transition into accelerating final demand growth in 2014,” Tim Toohey, head of Economics, Commodities and Strategy (ECS) Research, Australia and New Zealand at Goldman Sachs wrote in a report on Monday.

“Expectations for better U.S.-led developed market economic growth, a clear turn in housing activity and easy domestic financial conditions, a consensus has formed across the economics community and financial markets that a recovery has commenced in Australia,” Toohey added.

But Goldman Sachs is less upbeat about its outlook for the economy, forecasting a slowdown in growth to 2 percent in 2014 – below an expected 2.5 percent in 2013 and consensus estimates of 2.7 percent this year.

As a result, it believes interest rate cuts by the Reserve Bank of Australia (RBA) are more likely than hikes this year. The bank`s base case is for a 25 basis point rate cut in March.

The country`s cash rate currently stands at a record low of 2.5 percent. The central bank has cut rates eight times since November 2011.

“We believe the combination of rising unemployment and benign inflation dynamics, together with a challenging income environment and intensifying fiscal drag, will warrant further policy accommodation from the RBA,” he said.

Australia`s jobless rate rose to 5.8 percent in November from 5.7 percent in October, nearing a post-financial-crisis high.

In addition, while a recovery in the non-mining sector appears underway, it is building too slowly ahead of the mining growth drag, Toohey noted.

“The response of the non-mining economy to previous interest rate reductions has been usually slow,” he said.

Gross National Expenditure – a broad measure of domestic economic demand – for example, had declined in three out of the last four quarters, according to the bank.

“The delay in moving financial conditions into clear expansionary mode, high household deposits vis-à-vis history, fiscal restraint, domestic political uncertainty and an uncertain global backdrop were all reasons why the transmission mechanism from monetary policy may have been weaker in the post commodity peak period,” he said.

-By CNBC`s Ansuya Harjani. Follow her on Twitter: @Ansuya_H

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow