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Property Market Nearing a Trough?

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Property Market Nearing a Trough?

Property Market Nearing a Trough? While some key economic indicators in China took a pause in July from their improving trend of recent months, we believe targeted policy stimulus will drive growth higher though the rest of the year and into 2015.

The domestic equity market has shrugged off the recent batch of weak numbers and the MSCI China A Share index has rallied 10% in the past month.

One of the factors weighing on economic performance recently is weakness in the property sector.

According to IMF calculations, the real estate sector together with construction accounts for 15% of GDP, a quarter of fixed asset investment and 14% of urban employment. The health of the property sector is therefore important to the health of the overall economy.

We believe that the property sector is going through an orderly correction and will near a trough in coming months as the effects of policy stimulus kicks in.

We believe the government has the capacity and the policy conviction to stimulate the property market and the broader economy into 2015.

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ORDERLY PROPERTY MARKET CORRECTION

The Chinese property market is correcting. Price growth has moderated in year-on-year terms and on a month-on-month basis, more cities have reported declines than ever before. We believe the deterioration in July will prompt further policy stimulus that will lead to a turn in the property cycle. The government is determined to see economic growth measured in GDP terms hit 7.5% this year and is unlikely to let a downturn in the property market derail its plans.

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Third tier cities suffering the most

The price moderation has been the most pronounced in third tier cities. Residential real estate inventories in third tier cities have increased the most. The oversupply is in part linked to local governments’ reliance on land sales to finance spending (see China Macro Monitor July 2014). Land is more easily available to developers in these cities as governments are keen to monetise their assets. We believe that reform in local government financing will reduce this source of supply over time.

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Real estate investment has moderated, but shows signs of stabilisation

Real estate fixed asset investment accounts for about a quarter of total fixed asset investment. While its growth has been moderating, it has stabilised at a relatively high level of over 14% y-o-y over the past three months. According to IMF calculations, a 1% decline in real estate investment could shave off 0.1% of GDP growth in the first year1. China appears to be very far from seeing an actual decline in investment, but we would expect the government to be vigilant against any downturn that would threaten its growth targets. The IMF projects GDP growth of 7.4% this year, with real estate investment growth moderating to 5% y-o-y.

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Property sales subdued while potential buyers wait on the side-lines

Potential buyers talking a ‘wait-and-see’ approach have been blamed for the decline in property sales. The pace of urban migration remains robust and pent-up demand to upgrade properties has certainly not fallen. With the threat of the malaise in the property market becoming self-fulfilling, we expect the government to offer further stimulus the break the cycle. Residential property sales had become less negative in June, but slipped further July alongside other measures of economic performance.

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Low household leverage and continued urbanisation bode well for medium term property demand

China is little over 50% urbanised, significantly less than other emerging markets such as Brazil and Russia and will continue to urbanise at a strong pace over the coming 20 years. According to the United Nation’s projections, 310 million Chinese citizens (i.e. a population close to the size of the US today) will migrate from the countryside to cities over the next two decades. The Chinese government’s ambitions are even grander – to move close to 400 million people to the cities. That speed and scale of migration is unprecedented in human history. Even though a number of cities appear to be over-supplied with property today, we believe that excess supply will soon be absorbed.

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Household indebtedness in China is also low by international standards. The orderly property market correction we foresee in China is unlikely to lead to a systemic problem for households because their financial leverage is relatively small.

We believe that such low level of indebtedness affords the government headroom to loosen house purchase restrictions (HPR) and lending criteria to stimulate the property market. As more Chinese people aspire to become homeowners, we are likely to see household leverage rise over time.

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Policy relaxation will provide a tail-wind

In contrast to 2008 and 2011, when the People’s Bank of China cut the reserve requirement ratio (RRR) to stimulate lending activity across the board, recent stimulus has largely been left to local governments and is therefore highly targeted2.

For example, a number of cities have relaxed rules that previously prohibited households from owning more than one property (house purchase restrictions or HPRs). 37 out of 46 cities that had such restrictions have reportedly relaxed to some extent.

Some cities and provinces have announced tax subsidies to spur demand while others have been buying properties that have already been built to add to their pool of social housing.

The PBoC has also asked banks to speed up mortgage approvals and apply ‘reasonable’ pricing, which could quicken the pace of home sales. Anecdotal evidence from media reports point to banks following through on that request.

Changes to the loan-to-deposit ratio (LDR) made in July will also free up banks’ capacity to lend. By reducing the categories of lending that need to be included in the loan component and increasing the number of items that can be included in the deposit component, banks will be able to avoid hitting their LDR limits so easily, allowing them to lend more to prospective home buyers.

To support real estate development, the central government has increased its social housing target to 7 million units of new starts (of which 4.7 million units will come from shanty town renovation). The central government is also leaning on local governments to see that red-tape does not slow the process of fiscal disbursement and planning approvals.

The central government could go further by relaxing Hukou policies, which currently apply laws asymmetrically to migrants from the country and native city dwellers. Easing of these laws, could allow the freer movement of people ratio and cut mortgage interest rates (either as part of an overall cut in rates or independently).

Developers display cautious optimism

The annual decline in floor space started has been narrowing in recent months, in a sign that property developers are becoming more optimistic about future demand. Developers need to plan ahead of the actual turn given the lag between starting development and the actual completion of properties to sell in the market. Nevertheless, if their optimism proves to be timely, we could see the property market trough soon.

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CHINA A SHARE SENTIMENT MARKEDLY IMPROVES

Despite the string of weak data in July, including disappointing loan and money supply growth, equity markets rallied. The MSCI China A Share index gained 9.5% last month.

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The China A Share market is also likely to benefit from the launch of the Shanghai-Hong Kong Connect, which expected in October 2014 (see Shanghai-Hong Kong Stock Connect: A Boost For China A Shares) . The initiative will open up access to the Shanghai stock market for foreign investors trading through Hong Kong. Systems testing for the initiative will start at the end of this month. We believe that the manner in which the quotas are applied will drive net flows into the mainland. At the moment, dual-listed stocks are trading at approximately an 8% discount on the A shares market compared to the H share market. The introduction of the Shanghai-Hong Kong Connect should see that discount dissipate over time. Valuations of the China A share market indicate that it is cheap. Its prospective PE now stands at 10.2, 63% below its peak in 2007. It is not often that the stock market of one of the world’s largest and fastest growing economies is trading at one of the world’s lowest valuations. The imminent implementation of the Shanghai-Hong Kong Connect programme should help to speed the process of valuation normalisation.

Important Information

This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the ”FCA”).

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Oct. 24 crypto market update & Performance attribution Hashdex Crypto Index ETPs

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Please find below Hashdex monthly crypto market update and performance attribution for Hashdex Crypto-Index ETPs for October 2024.

Please find below Hashdex monthly crypto market update and performance attribution for Hashdex Crypto-Index ETPs for October 2024.

With October often showing strong seasonality for crypto assets, this month’s results reflect a promising trend for Bitcoin, although gains were more limited across Altcoins. As outlined in our latest CIO note, “Beyond Trump and Harris: Five Congressional Races That May Impact Crypto’s Future”, several upcoming US congressional races could shape the regulatory landscape for crypto, with potential implications for institutional adoption and future price action. Bipartisan support for the asset class is expected to grow, depending on the results of key races.

We will share some updates during the week, if you need any inputs on US elections, feel free to reach out to us.

Hashdex Crypto Index ETPs: performances (USD) as of end of October 24

Beta Index ETP Nasdaq Crypto Index ETP (HASH or HDX1) (largest Crypto Index ETP in Europe): October +7.1%, YTD +45%, 12M +89%.

• Smart-Beta Index ETP – Crypto Momentum Index ETP (HAMO or HDXM): October -0.5%, YTD +1.2%, 12M +71%.

Market Update – October 24

October, commonly known as ”Uptober” for its seasonally strong performance for Bitcoin, continued this trend in 2024. The month began with a volatile period, as the Nasdaq Crypto Index (NCI) initially gave back gains from September. All NCI constituents declined in the first ten days, with the exception of Uniswap, which announced plans for its own layer-two network on Ethereum.

Mid-month, the sentiment shifted, with a sharp rally that drove Bitcoin close to its all-time high by the 29th. The NCI ultimately closed the month up 7.1%, significantly outpacing traditional markets as both the S&P 500 and Nasdaq 100 declined slightly. This rally coincided with a sharp increase in former president Donald Trump’s odds in election betting markets, generating additional optimism around Bitcoin.

While Bitcoin posted a robust 10.6% gain, Altcoins generally underperformed. The notable positive exception among altcoins was Solana, which rose 9.0%. In contrast, Ripple declined 18.6% due to ongoing SEC litigation, and Polygon’s MATIC dropped over 20% as it migrated to a new token model (POL).

Nasdaq Crypto Index (NCI) relative to other asset class in October 24

Source: Hashdex, as of 30/10/24.

In comparison with traditional assets, the NCI’s 7.1% gain far outpaced the S&P 500 and Nasdaq 100, both of which posted slight declines. This performance underscores the potential for crypto assets to provide upside during periods of broader market uncertainty. The majority of this outperformance was driven by Bitcoin’s strength, underscoring its role as a cornerstone of the crypto asset class and its growing appeal as a macroeconomic hedge.

Performance attribution:

Nasdaq Crypto Index (NCI)

The NCI recorded positive returns for most of its primary constituents, with Bitcoin (+10.6%) leading the gains. Solana (SOL) also contributed positively, rising 9.0%. However, Ripple (XRP) and Polygon’s MATIC weighed on the index, with losses of 18.6% and over 20%, respectively. Ripple’s decline was largely attributed to ongoing legal issues with the SEC, while MATIC’s transition to the POL token created additional downward pressure.

Source: Hashdex, as of 31/10/24.

Crypto Momentum Factor Index

The Crypto Momentum Factor Index showed a slight monthly decline of 0.5% in October, reflecting the underperformance of altcoins in general. Although Tron (TRX) remained relatively stable, other altcoins in the index faced headwinds, leading to a small monthly loss for the index.

Source: Hashdex, as of 31/10/24.

Correlation (3m) to traditional asset classes

Source: Hashdex, as of 31/10/24. NCI for Nasdaq Crypto Index.

Hashdex Nasdaq Crypto Index ETP

Largest Crypto Index ETP in Europe, AUM ~$400m

ISIN: CH1184151731 / Tickers: HASH (SIX and Euronext) or HDX1 (Xetra) – tradable in USD, EUR, CHF and GBP

Hashdex Crypto Momentum Factor ETP

ISIN: CH1218734544 / Tickers: HAMO (SIX and Euronext) or HDXM (Xetra) – tradable in USD, EUR, CHF and GBP

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GSGR ETF investerar i gröna obligationer från hela världen

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Goldman Sachs Global Green Bond UCITS ETF EUR (Dist) (GSGR ETF) med ISIN IE000SYQFJV2strävar efter att spåra Solactive Global Green Bond Select-index. Solactive Global Green Bond Select-index följer gröna obligationer. Alla löptider ingår. Betyg: Investment Grade.

Goldman Sachs Global Green Bond UCITS ETF EUR (Dist) (GSGR ETF) med ISIN IE000SYQFJV2strävar efter att spåra Solactive Global Green Bond Select-index. Solactive Global Green Bond Select-index följer gröna obligationer. Alla löptider ingår. Betyg: Investment Grade.

Den börshandlade fondens TER (total cost ratio) uppgår till 0,22 % p.a. Goldman Sachs Global Green Bond UCITS ETF EUR (Dist) är den enda ETF som följer Solactive Global Green Bond Select-indexet. ETFen replikerar det underliggande indexets prestanda genom fullständig replikering (köper alla indexbeståndsdelar). Ränteintäkterna (kuponger) i ETFen delas ut till investerarna (halvårsvis).

Denna ETF lanserades den 13 februari 2024 och har sin hemvist i Irland.

Mål

Goldman Sachs Global Green Bond UCITS ETF är en passivt förvaltad, hållbar global obligationsfond som uteslutande investerar i gröna obligationer enligt bedömningen av Goldman Sachs Asset Managements investeringsteam för gröna obligationer.

Handla GSGR ETF

Goldman Sachs Global Green Bond UCITS ETF EUR (Dist) (GSGR ETF) är en börshandlad fond (ETF) som handlas på London Stock Exchange.

London Stock Exchange är en marknad som få svenska banker och nätmäklare erbjuder access till, men DEGIRO gör det.

Börsnoteringar

BörsValutaKortnamn
London Stock ExchangeEURGSGR
SIX Swiss ExchangeEURGSGR

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Microsoft considers bitcoin, UBS launches tokenized fund, and MicroStrategy will buy $42B in BTC

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Crypto markets faced a volatile week as key macroeconomic events approached, with the upcoming US presidential election and anticipated Fed rate decision fueling uncertainty in risk assets. Bitcoin (BTC) rose 1.7%, ether (ETH) declined 1%, Solana (SOL) fell 8.2%, and the Nasdaq Crypto IndexTM (NCITM) was down 0.5%.

Crypto markets faced a volatile week as key macroeconomic events approached, with the upcoming US presidential election and anticipated Fed rate decision fueling uncertainty in risk assets. Bitcoin (BTC) rose 1.7%, ether (ETH) declined 1%, Solana (SOL) fell 8.2%, and the Nasdaq Crypto IndexTM (NCITM) was down 0.5%.


Microsoft to consider bitcoin investment starting December

According to a new SEC filing, Microsoft is considering the possibility of investing in Bitcoin as a hedge strategy against inflation despite opposition from its Board of Directors. This move, by one of the world’s largest companies, would mark a significant step in institutional adoption for Bitcoin.

MicroStrategy discloses plans to buy $42B of BTC

The firm announced bold plans to raise $42 billion over the next three years to acquire more bitcoin. This new wave of capital will be split equally, with $21 billion from equity issuance and $21 billion from debt offerings, in a project called the ”21/21” plan. This move, led by founder Michael Saylor, underscores bitcoin’s potential as a valuable hedge against inflation and highlights its appeal as a strategic investment option.

UBS launches its first tokenized fund on Ethereum

UBS Asset Management has launched its first tokenized fund, the USD Money Market Investment Fund Token (uMINT), a money market fund built on the Ethereum blockchain, available through authorized partners. The launch supports the growing demand for tokenized financial assets and leverages distributed technology to enhance fund issuance and distribution, as well as UBS’s broader strategy to expand its tokenization services.


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