Stock prices in London were lower at midday on Monday, with market mood uneasy as a crisis in the Chinese real estate sector fuelled concerns about the health of the world’s second-largest economy.
‘A crisis in the Chinese real estate sector is a story the market has heard before and not one which has typically come with a happy ending for stocks,’ said AJ Bell investment director Russ Mould.
The FTSE 100 index was down 15.66 points, 0.2%, at 7,508.50. The FTSE 250 was down 13.92 points, 0.1%, at 18,785.78, and the AIM All-Share was down 1.91 points, 0.3%, at 754.66.
The Cboe UK 100 was down 0.2% at 748.98, the Cboe UK 250 was down 0.2% at 16,499.18, and the Cboe Small Companies was down 0.2% at 13,581.46.
Shares in Chinese property giant Country Garden closed down 18% in Hong Kong on Monday after it missed bond payments and warned of multibillion-dollar losses. This led to deepening concerns over the nation’s heavily indebted real estate sector.
Country Garden is a real estate firm named in Forbes’ list of the 500 largest companies in the world.
Its boss, Yang Huiyan, was until recently one of the richest women in Asia. But now, Huiyan has said the firm is ‘facing the greatest difficulties since our establishment’.
The firm has long been deemed financially solid but, last Monday, was unstable to make two bond payments, and after a 30-day grace period the company risks defaulting in September if it still cannot pay.
Country Garden announced over the weekend it would suspend trading of onshore bonds from Monday, a decision likely to cause concern in the markets as the company said its debt was estimated at some ¥1.15 trillion, or $159 billion, at the end of 2022.
Like its competitor Evergrande, which owes more than $300 billion, any collapse of Country Garden would have damaging repercussions on the Chinese financial system and economy.
The weaker outlook from China was weighing on oil prices on Monday. Brent oil was quoted at $86.59 a barrel at midday in London on Monday, down from $86.97 late Friday. On the back of this, oil majors BP and Shell were down 0.8% and 1.0%, respectively, in London.
Asia-focused bank Standard Chartered was down 0.5%. Insurer Prudential, which is also Asia-focused, was down 1.4%.
Meanwhile, miners Frensnillo, Anglo American, Glencore and Rio Tinto were down 1.8%, 1.6%, 1.4%, and 1.0%, respectively.
Gold was quoted at $1,914.02 an ounce, lower against $1,916.88.
Moving away from Chinese property woes, eyes are on UK inflation this week.
‘The higher than anticipated rate of US producer price inflation reported on Friday – often a good indicator of the trajectory of consumer prices – is helping to sour sentiment and raises the stakes ahead of UK CPI figures on Wednesday this week,’ said AJ Bell’s Mould.
The US producer price index for final demand rose 0.8% on an annual basis in July, quickening from a 0.1% increase in June. Markets were predicting July’s print to quicken to 0.7%, according to FXStreet-cited consensus.
UK consumer prices are expected to slow down to 6.8% in July annually, from 7.9% a year earlier. The figures will be released on Wednesday. UK unemployment figures will be out the day prior.
In the FTSE 250, Plus500 was up 2.2%.
The London-based financial technology company providing online trading services said total revenue fell 28% to $368.5 million in the first six months of 2023 from $511.4 million a year earlier. Pretax profit dropped to $174.9 million from $312.6 million.
Plus500 declared an interim dividend of $0.41 as well as a special dividend of $0.32. In addition, it announced a new share buyback programme of $60.0 million, which will begin once the current programme is completed.
‘This demonstrates the strength of our balance sheet and the board’s continued confidence in the group’s prospects,’ said Chief Executive Officer David Zruia.
On London’s AIM, Glantus Holdings surged 53% to 30.65 pence.
The Dublin-based provider of accounts payable automation and analytics services agreed on a recommended all-cash offer by Genesis Bidco, a company wholly-owned by Basware Oy.
The offer is for 33.42p per share, which is a hefty premium to the 11.2p closing price on July 4 before takeover discussions were first announced. It is also a 67% premium to Glantus’s closing price on Friday.
It gives the company a valuation of £17.8 million on a fully diluted basis, and implies an enterprise value of £29.5 million.
‘Despite recent challenges, the business has significant scope to further expand its footprint, which we believe will be best achieved in the private arena where Glantus can benefit from the experience and capital of Basware as its partner, whilst maintaining the management and wider team which have driven the business forward to date,’ said CEO Maurice Healy.
Harvest Minerals shares dropped 26%, after it downgraded its 2023 sales target for its application fertiliser KP Fertil.
The London-based fertiliser producer with operations in Brazil said it now aims to sell 70,000 tonnes of KP Fertil during 2023, down from its revised target of 120,000 tonnes set in June. Back in April, the company said it was on track to achieve its original target of 200,000 tonnes.
In European equities on Monday, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt was up 0.5%.
Stocks in New York were called higher. Both the Dow Jones Industrial Average and the S&P 500 index are called up 0.2%. The Nasdaq Composite is called up 0.4%.
The pound was quoted at $1.2696 at midday on Monday in London, lower compared to $1.2703 at the equities close on Friday. The euro stood at $1.0949, lower against $1.0961. Against the yen, the dollar was trading at JP¥144.95, higher compared to JP¥144.80.
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