London pre-open: Stocks to fall as China property crisis deepens

by | Aug 18, 2023

(Sharecast News) – UK stocks were expected to fall for the sixth straight session on Friday on signs that the ongoing real estate crisis in China is far from over.
Futures on the FTSE 100 were down 0.4% at 7,275 in pre-market trade. The index has not closed below this level since 10 July.

Overnight, China Evergrande, the heavily indebted property group and once the country’s second developer, filed for chapter 15 bankruptcy in New York – allowing it to protest its assets in the US as it works to restructure its debt and renegotiate with its creditors.

The Guangzhou-based group, which is thought to hold over $300bn in debt, defaulted on its repayments back in 2021, prompting a string of defaults at other building companies. The latest news – just days after Country Garden told investors it could register a loss of $7.6bn in the first half of 2023 as it struggles to make its own bond repayments – will raise concerns about contagion to the wider financial services sector.

Back on home shore, data on Friday revealed that UK retail sales fell 1.2% in the month of July compared with June, official data showed on Friday, further than estimates as wet weather and the cost-of-living crisis hit volumes. Economists had forecast a fall of 0.5%, after a 0.6% increase in June.

In company news, Great Portland Estates announced the acquisition of King Sloane Properties, which owns freehold properties in Soho Square, Oxford Street, and Falconberg Mews, from Belgravia & Chelsea Property Services for £70m. The FTSE 250 firm said the multi-let, mixed-use buildings covered 57,456 square feet, with future plans for demolition to create 90,000 square feet of new Grade A office and prime retail space.

Impact Healthcare REIT announced it had purchased a new £50m interest rate cap on Friday, capping SONIA at 4.0% for two years until 15 August 2025, at a cost of £1.76m. As a result, the London-listed company said it had now hedged or fixed interest rates on 92% of its total drawn debt of £191m. As at 30 June, its gross loan-to-value ratio stood at 28.5%, with no additional debt incurred since then.

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