Monday, July 4, 2016
Meltdown for world's biggest shipbroker; UK business pessimism 'doubles after Brexit'; Kuwait plans $10bn bond to cover deficit
1 Meltdown for world’s biggest shipbroker (Sean Farrell in The Guardian) Shares in Clarkson, the world’s biggest shipbroker, lost a fifth of their value after it warned that weak global trade would cause a large fall in annual profit.
In an unscheduled trading update, Clarkson said the rates it could charge for shipping freight fell sharply in the first half of the year because of global economic uncertainty and a fall-off in trade. The statement did not mention the UK’s vote to leave the EU.
The Baltic dry index, which measures shipping rates, has dropped in recent months and came close to record lows in the first quarter of the year, Clarkson said. The group warned at its annual general meeting last month that trading was difficult and it has deteriorated further since.
The company’s main activity is arranging for businesses to charter ships to transport their goods. It also helps shipping companies raise finance and provides research and support services such as logistics and equipment.
Broking transactions have increased but freight rates and the value of ships have fallen, reducing activity in Clarkson’s financial division. The company said its business was resilient with a strong pipeline of financial business and a strong balance sheet.
Clarkson shares fell as much as 23% and were down 18% at £18.13 in late morning trading. The shares have fallen by more than a third in the past year as concerns have mounted about the prospects for world trade amid a slowdown in China, the world’s biggest consumer of raw materials transported by ship.
2 UK business pessimism ‘doubles after Brexit’ (Helen Thomas on BBC) UK business confidence has fallen sharply in the aftermath of the vote to leave the EU, research suggests. The share of businesses that reported feeling pessimistic about the UK economy doubled in the week after the Brexit vote.
The figure jumped from 25% the week before the referendum to 49%, according to YouGov and the Centre for Economics and Business Research. Falling confidence can lead companies to pull back on investment and hiring.
The figures suggest that businesses have become more cautious in their outlook for sales and exports, as well as rethinking their investment plans. Business expectations for UK sales, exports and investment all dropped, according to the research.
The slump in business confidence comes after research last week showed a marked deterioration in consumer sentiment about the economy. YouGov/CEBR said that consumer confidence had fallen back to its lowest level since May 2013.
3 Kuwait plans $10bn bond to cover deficit (Khaleej Times) Kuwait plans to issue up to KD3 billion ($10 billion) in US dollar-denominated bonds and sukuk in international markets to help plug its budget deficit for the current 2016-17 fiscal year, the finance minister said.
It will also borrow up to KD2 billion in debt from the domestic market in conventional and Islamic instruments, said Anas Al Saleh, who is also deputy prime minister and acting oil minister.
Like other Gulf Arab states, Kuwait is turning to debt capital markets to raise money as oil prices remain at below half the levels they were at two years ago. Qatar in May sold $9 billion of eurobonds, while Saudi Arabia is talking to banks about a debut international bond issue.
The remainder of Kuwait's expected KD9.5 billion budget deficit for the current fiscal year, which began on April 1, will be covered by drawing down funds from the general reserve, Al Saleh said. The forecast deficit was after a deduction for the Future Generation Fund, a nest egg for when oil supplies diminish.
The ministry of finance was preparing a public debt strategy for the coming five years to cover the government's financing needs. The strategy included setting up a special unit to manage public debt within the ministry. It would work in cooperation with Kuwait Investment Authority, the sovereign wealth fund, and the central bank.