Friday, July 8, 2016
UK property fund turmoil continues; Australia's AAA rating in danger; How Chinese trawlers empty Guinea's oceans
1 UK property fund turmoil continues (Jill Treanor & Hilary Osborne in The Guardian) Shopping centres, office blocks and warehouses worth up to £5bn could be put up for sale as the turmoil in the UK commercial property sector prompted by the Brexit vote forces fund managers to revalue their portfolios or temporarily prevent investors withdrawing their savings.
With the pound under pressure on the foreign exchange markets, fund managers Legal & General, Foreign & Colonial and Dutch-owned Kames cut the value of their property funds. L&G cut the value of its £2.3bn fund by 10% – following a 5% cut last week – while F&C and Kanes both cut by 5%.
Aberdeen Fund Management announced on Wednesday it was halting trading in its property fund for 24 hours and devaluing it by 17% – thought to be the biggest adjustment ever made by a property fund . Aberdeen has since extended the trading ban until Monday.
Others have suspended dealings for longer, starting with Standard Life’s decision to halt trading in its £2.9bn commercial property fund, leading to a cascade effect with Aviva, Prudential’s M&G, Henderson, Columbia Threadneedle and Canada Life following suit – taking the total value of property funds suspended to £18bn.
One of the factors weighing on sentiment is uncertainty about the role of London as a financial centre outside the EU. George Osborne, the chancellor, met the heads of major international banks including Goldman Sachs and Morgan Stanley to discuss ways to keep the City as a major trading centre.
The turmoil has coincided with pressure on the pound, which has been trading at 31-year lows. Yields on UK government bonds – known as gilts – which have halved to 0.7% since the referendum are also being watched as investors seek safe havens and brace for a cut to interest rates.
2 Australia’s AAA rating in danger (Khaleej Times) Standard & Poor's has warned of a downgrade to Australia's coveted triple-A credit rating within two years, saying the knife-edge July 2 election may have weakened the government's ability to tackle its budget deficits.
It cut its outlook to negative from stable and said there is a one-in-three chance of a ratings downgrade should the government fail to materially improve its balance sheet. "We will continue to monitor, over the next six to 12 months, the success or otherwise of the new government's ability to pass revenue and expenditure measures through both houses of parliament," S&P said.
Shane Oliver, head of investment strategy and chief economist at AMP Capital, said the negative credit watch should come as no surprise. "Australia has now seen years of slippage in returning the budget to surplus and the messy election outcome threatens more slippage whichever way it goes," he said.
S&P last downgraded Australia's credit ratings in October 1989. In May 1999, the agency upgraded the rating to AA+ and in February 2003, it restored the nation's top notch AAA rating where it has stayed since. On the positive side, S&P said it considered Australia's banking system to be one of the strongest globally and described the country as a "wealthy, diversified and resilient economy".
3 How Chinese trawlers empty Guniea’s oceans (Tamasin Ford on BBC) Chinese fishing vessels operate illegally off the coast of Guinea, depleting its fish population and destroying marine life. Despite the economic and social consequences of illegal fishing, the Guinean government has failed to police its waters because it doesn't have money to operate surveillance equipment.
The UN estimates that illegal fishing strips the global economy of more than $23bn every year. And the waters off West Africa have the highest levels of illegal catch in the world, according to the UK-based non-profit organisation, the Environmental Justice Foundation (EJF). More than a third of all fish caught in the region is illegal, unreported or unregulated, it says.
"These illegal pirate fishing operators are in effect stealing from some of the poorest people on our planet to provide short-term profit to wealthy fishing operators," says EJF head Steve Trent.
He says a mixture of poor governance, limited resources and corruption create a situation ripe for exploitation. And Guinea is one of the worst examples. It's the only country in Africa banned from exporting fish to Europe; the world's biggest market.
Illegal fishing in Guinea got even worse as the country was battling the deadly Ebola virus, according to a Greenpeace investigation. "During the Ebola outbreak, the country focused all their resources and capacity to deal with Ebola," says Ahmed Diame, the Africa Oceans campaigner at Greenpeace. During a month-long mission at the end of 2014 while Ebola was ravaging the country, a Greenpeace ship spotted an illegal Chinese trawler once every two days.
Most of the Chinese vessels are known as bottom trawlers; banned in some parts of the world because they are so destructive. They scrape up everything from the bottom of the ocean, ripping up coral and oyster beds, taking with them everything in their path. "Up to 90% of the catch can be thrown back into the sea often already dead," according to Greenpeace.
Greenpeace also started another investigation in January this year across Cape Verde, Mauritania, Gambia, Guinea, Guinea Bissau, Sierra Leone and Senegal. It will take three years, but the organisation hopes it will get a more detailed analysis of the situation.