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Brazil Economy Will Grow 4% Next Year, Forecasts Mantega
http://www.ft.com/cms/s/0/a05d05e6-11a7-11e3-a14c-00144feabdc0.html#ixzz2e0fKTMEO By Joe Leahy in São Paulo Brazil’s Finance Minister Mantega speaks during a news conference in Brasili©Reuters Brazil’s economy will return to its former annual growth rate of about 4 per cent next year after it expanded at its quickest pace since 2010 in the second quarter, said Guido Mantega, the finance minister. The optimistic note came even as analysts have warning that the economy would weaken in the second half of 2013 despite the strong performance in the second quarter, when it grew 1.5 per cent compared with the previous three months. “A reduction in interest rates, taxes, in costs – all of that brought a level of dynamism to the Brazilian economy,” Mr Mantega told reporters. The strong advance for GDP in the second quarter, which grew 3.3 per cent compared with a year earlier, was driven by exports, investment and the agricultural and industrial sectors. The government, under political pressure after mass protests in June and with an election due next year, will be hoping the rebound proves sustainable. However, economists said the second-quarter performance, Brazil’s best since the first quarter of 2010 when the economy grew at its fastest pace in decades, would be difficult to sustain, with business confidence falling in July. The strong growth was well in excess of analysts’ forecasts of 0.9 per cent for the second quarter in a survey by Bloomberg. “Given the first signs that the labour market is losing momentum, private credit supply is moving sideways, and sentiment is softening, consumption could remain weak, which adds doubts to the sustainability of investment,” said Guilherme Loureiro, a Barclays economist. Exports in the second quarter grew 6.9 per cent compared with the previous three months, while imports rose only 0.6 per cent. This meant net exports added 0.8 percentage points to GDP growth during the period. Mr Loureiro said he had been expecting 0.3 percentage points of growth from net exports, meaning that much of the surprise in the second-quarter GDP figure came from trade. Investment, much needed in the Brazilian economy, remained strong, growing 3.6 per cent, while private and government consumption, the traditional drivers of the economy, grew only marginally. Agriculture, meanwhile, was up 3.9 per cent. Mr Loureiro said he would revise up his GDP estimates for full-year 2013 following the second-quarter result to 2.7 per cent. But he pointed out that a seasonally adjusted fall in auto production of 6 per cent in July and an expected decline in industrial production in the same month would mean a weaker third quarter. Alberto Ramos, an economist with Goldman Sachs, said growth could be flat in the third quarter, “dragged by the moderation in employment and real wage growth, the sharp decline in consumer and business confidence, and tighter domestic and more exigent external financial conditions”. Mr Mantega said that while the government was confident the recovery was under way, it would not be revising its forecast for this year of 2.5 per cent for the time being. “We will continue with our prediction of 2.5 per cent, with greater accuracy in our measurement by the end of the year,” he said. Continue reading
Property: Is This Just Another Bubble?
Is it time to ditch property just five months after one of the biggest boosts to the sector in decades? By Nick Reeve | Published Sep 02, 2013 The introduction of the government’s Help to Buy scheme in April triggered huge gains for housebuilders and other property-related stocks, which in turn has helped UK small and mid-cap managers – who have the widest selection of such stocks – to record strong 2013 performances. The average performance of the 10 biggest mid-cap focused funds so far this year has easily outstripped the wider IMA UK All Companies sector, according to FE Analytics – 23.4 per cent from mid-cap portfolios compared with 16.6 per cent from the sector. A big part of this outperformance has been exposure to the housing sector, whether through housebuilders or other companies indirectly linked to this area. Star mid-cap managers such as Franklin Templeton’s Paul Spencer and Old Mutual’s Richard Watts have been particularly vocal in their support for the housing sector. It’s easy to see why. Investment Adviser’s research into the top holdings of 10 UK mid-cap funds found that between them they invest in 22 property-related firms. Of these firms, 20 have posted share-price gains of more than 25 per cent in 2013 alone. Examples held by several managers, including both Mr Watts and Mr Spencer, include Ashtead Group, a provider of heavy-duty construction equipment, which has gained 42 per cent so far this year; and kitchen-maker Howden Joinery, which is up 51 per cent. But there are increasing signs that the property recovery may have run its course already, and it may be time for the likes of Mr Spencer and Mr Watts to cash in on their profits. Last month property fund managers from Aberdeen and Henderson told Investment Adviser that the easy money may already have been made from property, with Aberdeen’s Sanjeet Mangat warning investors in her £176.2m Property Share fund not to expect its strong performance track record to be repeated. Ms Mangat’s fund is a member of the Investment Adviser 100 Club of outperforming funds and providers (see page 29). John McClure, manager of the top-performing Unicorn UK Income fund, said in June that he was steering clear of most housebuilders and developers as they were “structurally flawed” and did not have any substance. Miton’s Martin Gray, manager of the £883m CF Miton Special Situations fund, believes the “run has happened” and, while acknowledging some upside may remain, says he “wouldn’t buy in now”. City Financial’s David Crawford – who runs the firm’s top-performing long/short UK Equity fund – points out that strong performance based almost exclusively on government stimulus is bound to be short-lived. Investors only need look at the reaction of the equity and bond markets to the potential slowing of another form of stimulus, quantitative easing, to see that such catalysts cannot last forever. The UK government is desperate to prove it can help more people onto the housing ladder, and with Help to Buy it is helping first-time buyers to secure mortgages with deposits of as little as 5 per cent. Many of the same companies held by UK managers have specific ‘Help to Buy’ pages on their websites, detailing what aid there is available for first-time buyers – and giving a strong hint that this scheme has directly benefited them. “In a properly free market the value of houses would drop,” Mr Crawford says, adding that banks are still not lending prudently to borrowers trying to get on the housing ladder. He highlights banks that are granting mortgages equivalent to eight or nine times an individual’s salary, as opposed to two or three times. Martin Gray adds that the Help to Buy scheme “sounds to me like electioneering, which is a little worrying”. But for those still surfing the wave of housing-related stocks, the end is not yet in sight. Patrick Newens, small-cap fund manager at F&C, argues that the “electioneering” by the government through Help to Buy is likely to mean the scheme will last until at least the next election in 2015. He adds that house price-inflation has only just started feeding into companies’ figures and analysts’ forecasts. “Housebuilders are all seeing earnings upgrades and their margins are going up,” he says, leaving room for “decent upgrades” still to come. In addition, Aviva Investors’ Toby Belsom says it is not all about property prices and first-time buyers. He points to St Modwen Properties, LSL Property Services and Paragon Group – all top holdings in his UK Smaller Companies fund – as examples of property-focused companies that are not dependent on house prices. Instead the companies operate in longer-term projects, renting, and the secondary market. For these reasons Mr Belsom says he is “comfortable” with the stocks’ valuations, in spite of some very strong numbers so far this year. Opinion is split between those that did back housebuilders and have benefited from the move, and those who by their own admission have not, including Mr Gray and Mr Crawford. The debate is likely to continue for as long as the stocks themselves keep pushing higher, but with specialist property managers already having to hunt ever harder for attractive valuations, investors should be at least wary of increasing their exposure. Continue reading
Property Deals Surge In Peripheral EU Countries
http://www.ft.com/cms/s/0/1066d5e2-1301-11e3-a05e-00144feabdc0.html#ixzz2dv1eMdXb September 1, 2013 Property deals surge in peripheral EU countries By Ed Hammond, Property Correspondent The appetite for commercial real estate in Europe’s most beleaguered countries has soared during the past three months, underlining the growing confidence among global investors that the continent’s property crisis is nearing an end. The value of property transactions in Europe’s peripheral economies – Portugal, Italy, Ireland, Greece and Spain – hit €2.3bn during the quarter to July, an increase of 60 per cent on the previous three months, according to research for Cushman & Wakefield, the property consultancy. The surge in activity is almost entirely the product of a return of international investment into property markets that, for the past six years, have been considered too risky at almost any price. Non-domestic purchases of offices and retail property in Spain, for instance, rose by almost 10-fold from the first three months of the year to €642m. In Italy, the quarter-on-quarter increase was a more modest 190 per cent. “Club Med was out of bounds for most investors just a few months ago,” said David Hutchings, head of research in Europe for Cushman & Wakefield. “But it has taken only a slight improvement in risk tolerances for the bigger markets of Spain and Italy, in particular, to start gaining attention again.” And it is not just the private equity investors – typically the first movers in Europe’s distressed property markets – who have started to sniff out deals in the peripheral economies. Large, traditionally low risk investment groups, such as insurers and pension funds, are on the hunt for fixed assets too. Axa Real Estate, the property arm of the French insurer, has completed deals in both Italy and Spain during the second quarter of the year. “Investors, including us, are starting to move slowly up the risk curve again and are seeing those markets open up,” said Anne Kavanagh, global head of asset management and transactions at Axa Real Estate. “But there will not be a rush into the peripheral countries; it was, after all, only a year ago that we were talking about a possible break up of the single currency.” The burgeoning activity puts the cluster of countries, often unflatteringly referred to as “the PIIGS”, at odds with the wider trend in Europe’s property market, where demand, having risen steadily for two years, ebbed during the past three months. The large cities of the continent, London in particular, have become saturated with competition from US, Asian and Middle Eastern property buyers, driving down yields and forcing many European investors to eek out returns in regional or higher risk submarkets. Continue reading
