Business

By Clare Jim

HONG KONG (Reuters) – A revolt by Chinese homebuyers, who have threatened to stop paying mortgages on hundreds of unfinished housing projects, is spurring a shakeout among cash-starved property developers who have long relied on pre-sales of apartments.

    Many private-sector developers, already gasping for funds and facing an uncertain future, have stoked the unrest as they delayed projects.

Homebuyers are responding not just with protests and threats of mortgage boycotts, but by taking their business to deep-pocketed state-owned developers, or insisting only on buying completed apartments.

This shift in behaviour looks set to reshape China’s property sector, analysts and developers say, while a number of private companies, who last year sold as much as 90% of new housing units before construction was complete, may not survive the transition. “It’s a vicious cycle. If homeowners stop repaying mortgages … property recovery will be impacted,” said ANZ senior China economist Betty Wang. She said buyers of unfinished projects may balk not only because of construction delays, but because of falling home values as the market softens.

Uncertain job and financial prospects in the lagging economy and environmental issues have also stirred the agitation for mortgage boycotts.

The disruption comes at a sensitive time for China’s property sector, which accounts for a quarter of the country’s economic output and showed signs of stabilising in June when prices were unchanged after falling for two months.

The sector has been lurching from one crisis to another over the past year, as it grapples with mounting liabilities, a slowing economy and flagging demand, while its sources of fresh fundraising have been drying up.

Some private developers have already defaulted on offshore debt obligations and struggled to raise funds from other sources, including banks. “It’s a domino effect: No new homebuyers will buy our unsold apartments in the pre-sale, but we need to use the little money we get from selling half or two-thirds of the units to complete construction,” said an executive at a private developer that has missed its dollar bond payments but has not halted construction.

The executive declined to be named due to the sensitivity of the matter. “After repaying bank loans with the money left, if there is any, it’s almost impossible also to repay the onshore and offshore bonds.”

PROJECT DELAYS

Estimates vary widely on unfinished projects, with analysts contacted by Reuters putting the figure at 5% to 20% of projects nationwide.

ANZ estimates that 1.5 trillion yuan ($222 billion) worth of mortgages are tied to apartments at risk of remaining unfinished, or 4% of total outstanding mortgages. China’s banking regulator repeatedly sought to reassure homebuyers and financial markets over the past week that pre-sold homes would be properly delivered, while encouraging lenders to provide funds as needed to worthy real estate projects. State-owned developers have also taken over some troubled projects from heavily indebted non-state companies, and some analysts and sector players expect stepped-up takeovers to address the mortgage protests. Those protests have reached an unprecedented scale, with more than 200 projects by at least 80 property developers affected across China, E-house China Research and Development Institution said in a report this week. The turmoil is expected to accelerate changes already evident in the preferences of homebuyers, who have long favoured new properties still on the drawing board or under construction but grew wary of unfinished projects as high-profile developers – notably China Evergrande Group – plunged into a debt crisis over the past year. The ratio of pre-construction sales to sales of existing homes has dropped to 6.5 from a high of 9.9 in the first half of last year, according to ANZ. Homebuyers are also leaning towards more financially secure, state-owned developers. Jason Li, a 30-year old would-be homebuyer in eastern China’s Shangdong province, said he was delaying buying a home because he is worried about the economy and job security, and said he would avoid projects by private developers. “It took a few years for my friends to finally get their pre-sold homes, while many developers even failed to deliver the apartments as promised,” said Li.

Moody’s added in a report that the boycott would accelerate the shakeout of struggling developers.

“The rise in mortgage defaults …will further differentiate financially strong developers from their weaker peers,” it said.

($1 = 6.7468 Chinese yuan renminbi)

(Reporting by Clare Jim; Additional reporting by Liangping Gao in Beijing and Samuel Shen in Shanghai; Editing by Edmund Klamann)

source

(Reuters) -Employees at a Miami investment firm had learned of a pending merger deal between former President Donald Trump’s social media company and a blank-check entity long before it was announced, the New York Times reported on Monday, citing three people familiar with the discussions.

Officials of the firm, Rocket One Capital, at the time talked about ways to profit off the soon-to-be-announced transaction with Trump Media & Technology Group by investing in the special purpose acquisition company, or SPAC, Digital World Acquisition Corp (DWAC), the Times reported https://nyti.ms/3ILscSe, citing two of the people.

“Mr. Shvartsman and Rocket One Capital intend to fully cooperate in the investigations. Any assertion that Mr. Shvartsman or Rocket One Capital had any advance knowledge of the potential transactions contemplated by DWAC is categorically false,” a lawyer representing Rocket One’s founder Michael Shvartsman said in an email to Reuters.

Trump Media did not immediately respond to Reuters’ request for comment.

Federal prosecutors and regulators are now investigating the merger, including the frenzied trading in the SPAC’s warrants, the report said, citing people familiar with the investigation and public disclosures.

Trump Media & Technology Group, the creator of social media platform Truth Social, agreed to merge with Digital World on Oct. 20. The deal was expected to close by the second half of this year.

Digital World shares soared as much as 350%, a day after the deal was made public.

(Reporting by Echo Wang in New York, Mrinalika Roy in Bengaluru; Editing by Anil D’Silva)

source

By Tom Hals and Sheila Dang

(Reuters) -Twitter Inc began making its case on Tuesday for a September trial over its lawsuit seeking to hold Elon Musk to his $44 billion takeover, saying the uncertainty caused by Musk’s attempt to walk away was harming the company.

“The continued uncertainty inflicts harm to Twitter every hour of every day,” said William Savitt, an attorney for Twitter, at the hearing that was being conducted remotely after the judge, Chancellor Kathaleen McCormick, tested positive on Monday for COVID-19.

The San Francisco-based company is seeking to resolve months of uncertainty for its business as Musk tries to walk away from the deal over what he says are Twitter’s “spam” accounts that he says are fundamental to its value.

Twitter has asked McCormick of Delaware’s Court of Chancery to find Musk breached the merger agreement and to order him to complete the merger at the agreed price of $54.20 per share.

Twitter wants an expedited trial in September because it said Musk is smearing Twitter and undermining operations by refusing to approve business initiatives, such as an employee retention plan.

The company said adopting Musk’s “slow walk” proposal for a February trial leaves little time for additional litigation over deal financing if Musk is ordered to close. The deal financing expires in April.

A lawyer for Musk blamed Twitter for dragging its feet in responding to Musk’s requests for information regarding the methods for calculating the number of spam accounts and he said an expedited trial will prevent the truth from coming to light.

“When Mr. Musk started asking questions, the answers he got were alarming,” said Andrew Rossman, Musk’s lawyer. He said it will take months to analyze massive amounts of data to resolve Musk’s questions about Twitter’s spam accounts.

Rossman also pushed back on the notion that Musk was trying to harm Twitter, pointing out the billionaire held a larger stake than the combined holdings of the directors of Twitter.

Twitter’s stock has slumped from above $50 a share when the deal was announced to as low as $32.55 last week.

It was trading around $39.16 on Tuesday morning, up about 2% and near the highest level since Musk said he was walking away.

(Reporting by Tom Hals in Wilmington, Del. Additional reporting by Sheila Dang in DallasEditing by Noeleen Walder, Rosalba O’Brien and Matthew Lewis)

source

By Uday Sampath Kumar

(Reuters) -Hasbro Inc’s higher-priced toys powered its quarterly profit jump, defying an inflation-driven demand slump gripping American retail and sending its shares 2% higher on Tuesday.

The company is leaning on product launches including new Nerf blasters and expansion packs for its “Magic: The Gathering” role-playing game at a time when fears of a slowdown have gained ground among toymakers.

Walmart Inc and Target Corp – which together account more for than a third of Hasbro’ sales, according to UBS – have in recent months warned of the toll rising prices were taking on shoppers.

Still, the company is yet to see any push back from consumers over price hikes and could raise rates further if costs increase, Chief Executive Officer Chris Cocks told Reuters.

“Toys tend to be resilient in a recession,” Cocks said. “Parents want to keep investing in their children, and toys and games are good entertainment value for the money.”

For the second quarter, Hasbro posted an adjusted profit of $1.15 per share, beating analysts’ estimates of 94 cents, according to Refinitiv data.

INVENTORY HEADACHE

Despite the strong sales, Hasbro’s inventories swelled by more than 73% as it expedited shipments to avoid the shortages it faced during last year’s holiday season.

Jefferies analyst Stephanie Wissink said the build-up could hurt margins if inflation starts weighing on consumer demand for toys.

“We initially assumed toy companies would be able to fully pass through pricing, but we’re seeing some signs that there’s emerging pushback from retailers and consumers,” Wissink said.

CEO Cocks said he expects Hasbro to end 2022 with roughly flat inventory levels compared with a year earlier.

(Reporting by Uday Sampath in Bengaluru; Editing by Aditya Soni)

source

By Kevin Buckland

TOKYO (Reuters) – The U.S. dollar hovered on Tuesday just above a one-week low reached overnight versus major peers as markets reduced the odds of a percentage-point Federal Reserve rate hike this month.

Bets for supersized easing ramped up last week after data showed U.S. inflation, already at a four-decade high, continued to accelerate in June. But some Federal Reserve officials were quick to throw cold water on such talk, and figures from Friday showed a easing of consumer inflation expectations to the lowest in a year.

Traders in futures contracts tied to the Fed’s short-term federal funds policy rate, who had been leaning toward a full-percentage-point rise in interest rates, shifted their bets firmly in favour of a 0.75-percentage-point increase at the upcoming meeting, with the odds last seen at about 81%.

The dollar index – which gauges the greenback against six counterparts – was flat at 107.47. That was off Monday’s low of 106.88 but also well back from the high of 109.29 last week, a level not seen since September 2002.

The euro, which is the most heavily weighted currency in the dollar index, slipped 0.08% to $1.01355, but that came after putting on around 0.6% overnight for a second day of strong gains.

The common currency slid as low as $0.9952 on Thursday for the first time since December 2002, pressured by uncertainty about a potential energy supply crunch in the euro zone.

Traders are biting their nails ahead of Thursday, when gas is supposed to resume flowing through the Nord Stream pipe from Russia to Germany after a shutdown for scheduled maintenance.

Russia’s Gazprom declared force majeure on gas supplies to Europe to at least one major customer, in a letter dated July 14 and seen by Reuters on Monday.

Despite the uncertainty, the European Central Bank is poised to raise interest rates on Thursday for the first time in more than a decade. It has telegraphed a 25 basis-point move, but heated inflation has some traders punting for a half-point hike.

“The balance of risks is tilted to a weaker EUR (whereas) the path of least resistance for the USD is to continue trending higher because of the poor global growth outlook,” Commonwealth Bank of Australia analyst Carol Kong wrote in a client note, referring to the dollar’s role as a safe haven.

Elsewhere, the yen hovered near a 24-year low ahead of a Bank of Japan policy decision on Thursday, with the central bank committing repeatedly in recent days to continued ultra-easy settings.

The dollar was little changed at 138.135 yen, not too far from Thursday’s peak at 139.38, a level not seen since September 1998.

The risk-sensitive Australian dollar slipped 0.06% to $0.6809, after climbing to a one-week high at $0.6853 on Monday, from as low as $0.66825 on Thursday, the weakest in more than two years.

Sterling eased 0.13% to $1.1935, pulling away from Monday’s one-week high of $1.2032. It slumped to $1.1761 on Thursday for the first time since March 2020 as Britain faces an acrimonious and divisive contest to replace ousted prime minister Boris Johnson.

(Reporting by Kevin Buckland; Editing by Shri Navaratnam)

source

SEOUL (Reuters) – U.S. Treasury Secretary Janet Yellen said on Tuesday that the United States will impose harsh consequences on those countries that abuse or break international economic order.

“Economic integration has been weaponized by Russia,” she said, calling for all responsible countries to unite in opposition to Russia’s war in Ukraine.

She said she was heartened by conversations with Korean counterparts on a proposed cap on Russian oil price while visiting South Korea, the final leg of her 11-day visit to the Indo-Pacific region.

(Reporting by Andrea Shalal; Writing by Joyce Lee; Editing by Himani Sarkar)

source

TOKYO (Reuters) – The Japanese government has not yet received word that a new Russian company set to operate the oil and gas Sakhalin-2 project has been established, industry minister Koichi Hagiuda said on Tuesday.

“We will decide on our next steps once the terms of getting involved in the new company are made clear,” he added.

A decree issued by Russian President Vladimir Putin in late June that seizes control of gas and oil project Sakhalin-2 via a new company has threatened to cut off a crucial source of gas supplies for Japan.

(Reporting by Sakura Murakami; Editing by Kim Coghill)

source

SHANGHAI/BEIJING (Reuters) -Chinese regulators stepped up efforts to encourage lenders to extend loans to qualified real estate projects as the property sector faced fresh risks from a widening mortgage-payment boycott on unfinished houses.

The China Banking and Insurance Regulatory Commission (CBIRC) told the official industry newspaper on Sunday that banks should meet developers’ financing needs where reasonable.

The CBIRC expressed confidence that with concerted efforts, “all the difficulties and problems will be properly solved,” the China Banking and Insurance News reported.

The remarks come as a growing number of home buyers across China threatened to stop making their mortgage payments for stalled property projects, aggravating a real estate crisis that has already hit the economy.

The latest news helped banking and property stocks recover some of their recent losses. China’s banking index, which tumbled 7% to a more than two-year low last week, bounced more than 1% on Monday morning. Chinese real estate stocks gained more than 2% on the mainland, and jumped nearly 5% in Hong Kong.

“I think the Chinese government has the will and means to solve the problem, and will likely take swift actions,” said Mark Dong, Hong Kong-based co-founder and general manager of Minority Asset Management.

“The biggest risk is impairment to consumer confidence, which threatens the nascent recovery in property sales.”

Dong expects state-owned developers to step in and acquire troubled projects from heavily-indebted private peers, accelerating an industry consolidation.

The CBIRC had already vowed last Thursday to strengthen its coordination with other regulators to “guarantee the delivery of homes”.

The rebound in Chinese banking stocks was also aided by news that China will accelerate the issuance of special local government bonds to help supplement the capital of small banks, part of efforts to reduce risks in the sector.

In the Sunday interview, the regulator urged banks to “shoulder social responsibility” and actively participate in the study of plans to fill the funding gap and support acquisitions of real estate projects.

The regulator hoped these steps would help stabilize the property market by enabling the swift resumption of stalled real estate construction and delivery of homes to buyers early.

Mainland property shares rebounded sharply in Hong Kong.

Country Garden Holdings Co, Longfor Group and CIFI Holdings (Group) Co all jumped more than 6%.

(Reporting by Beijing and Shanghai newsroom; Editing by Hugh Lawson & Shri Navaratnam)

source

SYDNEY (Reuters) – Qantas Airways Ltd has rearranged its flight schedule from London’s Heathrow Airport amid the hub’s move to cap passenger capacity and limit disruption, a spokesperson for the Australian carrier said on Monday.

The airline delayed the departure of its London-Perth flight by three hours on Sunday and has brought forward the departure of its London-Singapore flight on Tuesday by nine hours, with other changes possible as Britain’s busiest airport looks to limit queues, baggage delays and cancellations through September.

“We have two flights a day to London and we want to preserve them at all costs given people’s travel plans are at stake,” the Qantas spokesperson said.

Bringing forward the London-Singapore departure on Tuesday will result in an 11-hour layover in Singapore before the plane continues on to Sydney, during which time Qantas will provide accommodation for passengers.

“We’ve managed to negotiate a workaround that isn’t perfect but will get our customers to their destination,” the spokesperson said. “We continue to work with Heathrow on improving this situation.”

Aviation data firm OAG last week estimated the passenger caps at Heathrow would lead to $550 million in lost airline revenue.

Emirates said on Thursday it had rejected demands by Heathrow to cut capacity, despite being threatened with legal action, and intended to continue operating its six daily flights to the airport.

A day later, the Dubai-based airline reached an agreement with the airport to cap further sales on flights out of Heathrow through mid-August, according to a joint statement https://www.emirates.com/media-centre/heathrow-airport-and-emirates-joint-statement from Emirates and Heathrow.

(Reporting by Jamie Freed; Editing by Kenneth Maxwell)

source

By Sameer Manekar

(Reuters) -Australia and New Zealand Banking Group said on Monday it will buy insurer Suncorp Group’s banking unit for A$4.9 billion ($3.33 billion) to bolster its customer growth and home loan book even as it withdrew from talks to buy software firm MYOB Group.

ANZ, one of Australia’s top lenders whose business has been slowed by loan application processing times, will look to reinforce its mortgage books by assuming control of Suncorp Bank’s A$47 billion home loan portfolio.

ANZ loaned A$633.76 billion as of the end of fiscal 2021 – a meagre 1.9% growth from a year ago – while Brisbane-based Suncorp Bank had A$57.56 billion gross loans, of which 80% consisted of home loans. (https://bit.ly/3cazZg8) (https://bit.ly/3u4ZKoa)

“With much of the work to simplify and strengthen the bank completed, and our digital transformation well-progressed, we are now in a position to invest in and reshape our Australian business,” ANZ Chief Executive Officer Shayne Elliott said.

The acquisition is expected to have a net impact on level 1 common equity tier 1 (CET1) of about 28 basis points on a pro-forma basis as at June 2022, ANZ said.

The Melbourne-based bank will raise about A$3.5 billion to fund the deal, which is expected to boost earnings in the low single digits on a run-rate basis for fiscal 2023. ANZ expects to pay a final fiscal 2022 dividend of 72 Australian cents per share, it added.

The deal will give Suncorp net proceeds of A$4.1 billion. It plans to return most of it to shareholders.

“We believe the agreed price fairly values the bank and reflects the hard work of our people and progress made on delivering our strategic objectives,” Suncorp Chairman Christine McLoughlin said.

In a separate statement to the exchange, ANZ said it was withdrawing from discussions with private equity giant KKR & Co to buy software firm MYOB Group, only a week after it confirmed the talks.

($1 = 1.4734 Australian dollars)

(Reporting by Sameer Manekar in Bengaluru; Editing by Daniel Wallis and Richard Chang)

source