Perspective

FT – Samsung set to eclipse Intel as world’s number one chipmaker – Song Jung-a 6/27

• “Samsung Electronics is expected to overtake Intel as the world’s largest chipmaker in the current quarter, for the first time ever, on the back of strong demand for chips for mobile devices and data servers.”
• “Intel has been the number one chipmaker since 1993 after releasing the Pentium CPU (central processing unit) for personal computers. However, the rapid adoption of mobile devices around the world has enabled Samsung to close the gap in chip sales in recent years.” 
• “Samsung is estimated to have generated $15.1bn in chip sales for the April-June quarter, surpassing Intel’s estimated sales of $14.4bn, according to Nomura. Samsung is also expected to displace Intel as the industry leader for the full year, unless memory chip prices fall sharply in the second half. Samsung’s 2017 chip sales are forecast at $63.6bn, versus Intel’s estimated $60.5bn.” 

Real Estate

The Lead Left – Private Debt Intelligence: North America Real Estate Debt 6/26

WSJ – Has America Built Its Last Major Mall? – Esther Fung 6/27

• “Appetite for building enclosed malls of more than 800,000 square feet has dried up. Department stores, once dependable foot-traffic generators, are closing locations amid stiff competition from off-price retailers and the growth of online shopping.”
• “A mall construction spree in the 1970s and 1980s has left in its wake aging properties at a time when there is little capital available for upgrades. As anchor stores close, more mall space sits idle and foot traffic wanes, hastening the march toward death.”
• “In all, there are roughly 1,200 malls in the U.S., and some analysts see the figure bottoming out at 500 to 800.”
• “As of the current quarter, there were 612 so-called superregional malls, which typically have a gross floor area of 800,000 square feet or more, only two more than there were in 2010. Between 2002 and 2009, there were 37 such malls built. The number of smaller enclosed malls of 400,000 to 800,000 square feet stands at 599, up by 16 since 2010. Between 2002 and 2009, 40 such malls were constructed.”
• “But other categories of retail are flourishing. The number of neighborhood shopping centers and strip centers has jumped by 2,303 since 2010 to 114,683. These centers typically offer a narrower range of goods and feature tenants such as grocery stores, laundromats and other necessity-based services that cater to nearby residents.”
• To be sure, not everyone is hurting.
• “Grade A malls in dense neighborhoods with above-average household incomes are still doing well, and their landlords argue that consolidation in the industry works in their favor.”

WSJ – Labor Shortage Squeezes Real-Estate Developers – Peter Grant 6/27

• “About two-thirds of the contractors who are struggling with the labor shortages gripping the construction industry say it has become a challenge to finish jobs on time, according to a new survey.”
• “More than one-third of contractors said they are being forced to turn work down and 58% said they are putting in higher bids, said the survey sponsored by USG Corp. and the U.S. Chamber of Commerce. Three-quarters of those who said they are having difficulty finding skilled labor said they are simply asking their employees to work harder.”
• “Labor shortages are partly due to the increasing number of construction projects moving forward. During the first four months of this year, construction spending amounted to $359.5 billion, 5.8% more than the same period in 2016, according to the U.S. Census Bureau.”
• “Also, tens of thousands of workers left the building trades during the economic downturn.”

Finance

WSJ – Daily Shot: US Leveraged Loan Issuance 6/26

WSJ – Daily Shot: Pension Partners – European High Yield Index – Effective Yield 6/26

Why… so much money chasing yield products.

WSJ – Daily Shot: Topdown Charts – ETF Assets in Yield Products 6/26

China

FT – China’s fake travel spending masks capital flight, warns Fed – Gabriel Wildau 6/28

• “Capital flight disguised as overseas tourism spending has artificially cut China’s reported trade surplus while masking the extent of investment outflows, according to research by the US Federal Reserve.” 
• “A significant share of overseas spending classified in official data as travel-related shopping, entertainment and hospitality may over a 12-month period have instead been used for investment in financial assets and real estate, the Fed paper argued.”
• “Disguised capital outflows in the year to September may have amounted to $190bn, or 1.7% of gross domestic product, according to the paper.”
• “Foreign exchange purchases by individuals are capped at $50,000 a year, with the money meant to be used for consumption purposes such as travel, foreign medical care and tuition.”
• “Until recently, however, Chinese bank tellers rarely asked for documentation to prove how the foreign currency they sold to individuals was actually used. Clients typically ticked the “travel” box on bank disclosure forms, even when they intended to stash funds in foreign bank or brokerage accounts.”
• “Those wanting to buy real estate or make other large investments could pool quotas from friends and family in a process known as “antlike house moving” — named after the way ants can transport an entire colony by carrying one small piece at a time.”
• “The Fed’s suspicion was sparked by a sharp rise of so-called travel spending among Chinese tourists.”
• 
• “Previously, official data showed the scale of Chinese travel spending was consistent with other middle-income countries. But in 2014 this spending became “anomalously high”, the Fed paper argued, with per-capita travel spending as a share of per-capita GDP reaching the same level as the UK — where per-capita GDP is seven times higher.”
• “Zhang Zhiwei, chief China economist at Deutsche Bank in Hong Kong, acknowledged the possibility of disguised capital outflow but suggests another explanation: the wealth effect from rising house prices. ‘It’s hard to pin down how much comes from each factor,’ he said.”

Europe

WSJ – Daily Shot: Bloomberg & BMI – Select European Country NPL Exposure 6/26

India

FT – Trump’s India property empire hit by tax shake-up – Kiran Stacey 6/27

• Come July 1, there will be a national goods and services tax that is implemented. In anticipation of this, many retailers and developers are pushing their products through discounts prior to the deadline.