German economy books strong finish to 2017

The final three months of the year saw Germany’s exports contribute more strongly to growth than they had between July and September. (AFP)
Updated 14 February 2018
0

German economy books strong finish to 2017

FRANKFURT AM MAIN: Europe’s largest economy Germany expanded 0.6 percent between October and December, official data showed Wednesday, highlighting the country’s economic strength as politicians struggle to form a government.
The figure follows up growth of 0.9 percent in the first quarter of 2017, 0.6 percent in the second, and 0.7 percent in the third — all adjusted for price, seasonal and calendar effects.
Combined, the quarterly results add up to 2.2-percent expansion over the full year, the fastest rate since 2011.
Wednesday’s data confirmed a preliminary estimate of full-year growth Destatis released in January.
The final three months of the year saw exports contribute more strongly to growth than they had between July and September.
Meanwhile, private consumption remained roughly flat quarter-on-quarter, while government spending increased.
Investments in capital goods increased, while construction spending fell back.
“Looking ahead, the same fundamentals which have supported growth in 2016 and 2017 should still be in place” this year, economist Carsten Brzeski of ING Diba bank said, pointing to low interest rates, a strong labor market and a synchronized upturn across the 19-nation eurozone.
“The economy could continue at its current pace for at least one or two more years without showing signs of overheating,” he added.
Germany’s economy ministry in January forecast slightly faster expansion of 2.4 percent this year.
Risks to the stable outlook remain, including protectionist impulses from President Donald Trump’s administration in the United States, increased geopolitical tensions in the eurozone and further afield, and the danger of a domestic political upset.
The center-left Social Democratic Party has struck a deal to renew its left-right “grand coalition” with Chancellor Angela Merkel’s conservatives after both suffered an election battering in September.
But members in the bitterly divided labor movement could reject the pact in a postal ballot by early March, leaving Merkel with equally unappealing options of a minority government or new elections.
“Following German politics is currently better than binge viewing TV series like ‘House of Cards’,” Brzeski quipped.


Dubai property developers put bond plans on hold

Updated 21 January 2019
0

Dubai property developers put bond plans on hold

  • Dubai property prices have fallen since a mid-2014 peak, hurt by a period of weak oil prices and muted sales
  • Residential prices fell 6 to 10 percent in 2018 and are expected to drop 5 to 10 percent more this year

DUBAI: Dubai’s Emaar Properties and state-owned developer Nakheel have put on hold plans to issue US dollar-denominated bonds, Emaar and sources familiar with the bond issues said, amid a real estate downturn and volatility in emerging markets.
Emaar told Reuters that it had put on hold a planned bond issue, blaming rising interest rates but did not elaborate. Nakheel declined to comment.
Three financial sources said the firms had planned dollar-denominated sukuk, or Islamic bonds, and would have had to pay a yield premium to attract enough investors due to concerns about Dubai’s property price slide and emerging market volatility.
Dubai property prices have fallen since a mid-2014 peak, hurt by a period of weak oil prices and muted sales, although the slide has not come close to the more than 50 percent plunge seen in 2009-2010, which pushed Dubai close to a debt default.
Residential prices fell 6 to 10 percent in 2018 and are expected to drop 5 to 10 percent more this year, according to Savills. The drop has hurt developer earnings.
Emaar, developer of Burj Khalifa, the world’s tallest building, reported a 29 percent fall in the third quarter last year, while Dubai’s second-largest listed developer DAMAC reported a 68 percent drop.
The financial sources said Emaar and Nakheel hired banks a few months ago to issue Islamic bonds but shelved the plans.
An Emaar spokesperson said its decision to put its plan on hold was not linked to the property market performance.
“The bond was considered more than a year ago and was put on hold due to increasing interest rates. The decision was not based on market conditions,” the spokesperson said.
Dubai government owns a minority stake in Emaar.
Nakheel, developer of palm shaped islands off Dubai, was one of the worst hit by Dubai’s 2009-2010 real estate crash, forcing it into a massive debt restructuring. It has not issued public debt since it nearly defaulted in 2009.
The market downturn has put pressure on property companies’ existing bonds, which investors use as a parameter to establish the price of new debt sales from borrowers in the same sector.
In secondary debt markets, yields of bonds issued by Dubai developers have risen significantly over the past few months, underperforming corporate debt from other sectors.
DAMAC’s $500 million sukuk due in 2022 and $400 million Islamic paper due in 2023 saw their yields spike by over 200 bps and 150 bps, respectively, since early November.
BofA Merrill Lynch last week forecasted weaker booked sales and gross margin for DAMAC, saying it was likely to be pressured by the property market and upcoming debt and land payments.
DAMAC did not immediately respond to a request for comment.
Yields on a $600 million sukuk issued by private developer Meraas, due in 2022, have jumped by around 120 basis points in the same period. Meraas declined to comment on the move.