April 19, 2018

Markets / Economy

FT – IMF sounds alarm on excessive global borrowing – Chris Giles 4/18

  • “The world’s $164tn debt pile is bigger than at the height of the financial crisis a decade ago, the IMF has warned, sounding the alarm on excessive global borrowing.”
  • “The fund said the private and public sectors urgently needed to cut debt levels to improve the resilience of the global economy and provide greater firefighting capability if things went wrong.”
  • “Worldwide borrowing is more than twice the size of the value of goods and services produced every year and at 225%t of global gross domestic product, is 12 percentage points higher than during the peak of the previous financial crisis in 2009.”
  • “Half of the $164tn was accounted for by three countries: the US, Japan and China. The latter’s borrowing surged from $1.7tn in 2001 to $25.5tn in 2016, accounting for three-quarters of the increase in private sector debt in the past decade.”
  • “With the global economy expanding strongly, it recommended that countries such as the US stop using lower taxes or higher public spending to stimulate growth and instead try to reduce the burden of public sector debts so that countries have more leeway to act in the next recession.”
  • “The outliers were Germany and the Netherlands, which the IMF said had ‘ample fiscal space’ to boost public investment in infrastructure and enhance the long-term resilience of their economies.”

Real Estate

WSJ – South Korean Investors Pile Into U.S. Commercial Property Debt – Esther Fung and Kwanwoo Jun 4/17

  • “In all, investors based in South Korea accounted for 21% of foreign investment in U.S. real-estate debt as of mid-April, the largest proportion among foreign investors, according to data firm Preqin. Canada and Australia are second and third place, at 12% and 11%, respectively. Global fundraising for U.S.-focused real-estate debt reached $17.8 billion in 2017, up from $10.8 billion in 2016, Preqin said.”

Bloomberg – The Retail Real Estate Glut Is Getting Worse – Noah Buhayar and Lauren Coleman-Lochner 4/17

  • “At last count, U.S. store closures announced this year reached a staggering 77 million square feet, according to data on national and regional chains compiled by CoStar Group Inc. That means retailers are well on their way to surpassing the record 105 million square feet announced for closure in all of 2017.”

Finance

FT – Eurozone investors race up chart of US debt owners – Kate Allen 4/17

  • “Eurozone investors have been the biggest overseas net buyers of US debt securities in the past half-decade, a trend that could reverse as the European Central Bank continues to tighten monetary policy, according to new research.”
  • “Euro area holdings of US corporate and Treasury bonds reached $2.75tn at the end of last year, the report by investment bank Jefferies shows, an 80% increase since the start of 2012.”
  • “By contrast the volume of US debt held by investors in Japan and China remained flat over the period, while investors in the UK increased their holdings by 40% to $700bn.”

Construction

WSJ – Daily Shot: CME Lumber (May) 4/17

China

WSJ – Daily Shot: China Required Deposit Reserve Ratio 4/17

  • Effective April 25, 2018. More liquidity into the system.

Other Interesting Links

WSJ – The Trophy Homes Linked to Chinese Conglomerate HNA Group – Katherine Clarke 4/18

  • “Chen Guoqing, the brother of HNA chairman Chen Feng, and a company Chen Guoqing heads called Pacific American Corp., have purchased more than 20 homes in New York and New Jersey over the past two decades through various limited-liability companies, the Journal’s review shows.”
  • “Those deals include four pricey residences at the megatower One57, the Billionaire’s Row megalith where owners include titans of industry such as Michael Dell and Bill Ackman. The units were purchased for a combined $151.34 million in 2014 and 2015, the records show.”
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