Stocks were pushed into the red in London on Monday morning as the Chinese property market faltered on missed bond payments by developer Country Garden.
The FTSE 100 index opened down 19.97 points, 0.3%, at 7,504.19. The FTSE 250 was down 25.95 points, 0.1%, at 18,773.75, and the AIM All-Share was down 0.57 of a point, 0.1%, at 756.00.
The Cboe UK 100 was down 0.2% at 748.88, the Cboe UK 250 was down 0.3% at 16,494.13, and the Cboe Small Companies was down 0.1% at 13,587.53.
In European equities on Monday, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was marginally higher.
‘[China’s] third quarter has started on a weak note, with weakening exports and imports in July, a significant property developer reportedly missing a bond payment, and CPI inflation joining PPI in the negative year-over-year territory, although primarily due to food prices,’ said SPI Asset Management’s Stephen Innes.
Shares in Chinese property giant Country Garden plunged on Monday after it missed bond payments and warned of multibillion-dollar losses, deepening concerns over the nation’s heavily indebted real estate sector. Its stock price was down around 15% in late dealings in Hong Kong.
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.
The firm has long been deemed financially solid but was unable last Monday 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 heavily indebted competitor Evergrande, any collapse of Country Garden would have catastrophic repercussions for the Chinese financial system and economy.
‘The two major contributors to China’s growth, exports and property, are experiencing major setbacks and negatively impacting the local and broader ASEAN risk markets,’ Innes continued.
In Asia on Monday, the Nikkei 225 index in Tokyo closed down 1.3%. In China, the Shanghai Composite was down 0.4%, while the Hang Seng index in Hong Kong was down 2.1%. The S&P/ASX 200 in Sydney closed down 0.9%.
Overnight on Tuesday, there will be some economic data for China for investors to consider, including industrial output, retail sales and fixed asset investment. House prices follow on Wednesday.
The weaker outlook from China was weighing on oil prices, with Brent trading at $85.74 a barrel early Monday, lower than $86.97 late Friday. This hindered shares in bluechip oil majors, with BP and Shell falling 0.6% and 0.7% respectively in early trading.
Elsewhere in the FTSE 100, other China-exposed firms were the worst performers. Miners like Rio Tinto and Anglo American fell 1.5% and 1.1% respectively, while Asia-focused bank Standard Chartered was down 1.2%.
Gold was quoted at $1,912.34 an ounce early Monday, down from $1,916.88 on Friday.
Meanwhile in the FTSE 250, Plus500 was up 4.2%, the top performer. Despite a weaker interim performance, the midcap firm announced a raft a shareholder returns.
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.
Despite ‘quieter’ market conditions, Plus500 said it is confident about its performance for the year as a whole. It expects revenue and Ebitda to be in line with current market expectations.
On AIM, Glantus shares jumped 54% to 30.88 pence it has agreed on a recommended all-cash offer by Genesis Bidco, a company wholly-owned by Basware Oy.
The AIM-listed Dublin-based provider of accounts payable automation and analytics services said 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 Chief Executive Maurice Healy.
In the US on Friday, Wall Street ended mixed, with the Dow Jones Industrial Average up 0.3%, the S&P 500 down 0.1% and the Nasdaq Composite down 0.7%. After a cooler-than-expected consumer price inflation reading on Thursday, investors were unnerved by a slightly faster-than-expected uptick in producer price inflation on Friday.
The dollar was slightly stronger in early exchanges in Europe.
Sterling was quoted at $1.2681 early Monday, lower than $1.2703 at the London equities close on Friday. The euro traded at $1.0934, lower than $1.0961. Against the yen, the dollar was quoted at JP¥144.86, up versus JP¥144.80.
On Tuesday, there will be UK unemployment figures, with UK inflation due on Wednesday.
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