China ends week down 8 percent, FTSE rallies
Chinese shares ended the week almost 8% lower, after a week of market volatility.
The Shanghai Composite closed up 4.8% at 3,232 points, with the Shenzhen Composite, closing up 5.4% to 1,846 points, but ended the week 9.4% lower.
The FTSE 100 steadied this morning after a week of heavy losses. Miners led the recovery, with BHP Billiton, Shell and Glencore up around 3 percent.
US reacts well to revised growth figures
The US economy grew by far more than was initially thought between April and June.
The revised figure was inflated from 2.3 percent, as previously announced, to 3.7% to reflect greater corporate investment.
Wall Street reacted well to the news, with the Dow up 1.3 percent an hour after opening. Economists polled by Reuters had expected that second-quarter GDP growth would be revised to a 3.2 percent rate.
Consumer spending figures were also revised, growing at 3.1 percent, rather than the 2.9 percent pace reported last month.
Could China’s fall be a blessing for India?
Monday’s ‘Great Fall of China’ left the financial world in shock, with trillions being wiped from markets globally on fears that the world’s second biggest economy may be about to suffer a collapse. China’s economy is having a tricky time of it and investors are clearly shaken.
However, as one country’s economy goes downhill, another’s has the chance to shine; and now could be the moment for India to take centre stage. Its output growth accelerated to 7.5% last quarter, putting it ahead of China as the world’s fastest-growing large economy.
Without a doubt, India is emerging as a challenger to China’s global status. After the US and China, it is the world’s third largest economy and its growth is impressive; India’s gross domestic product grew a staggering 7.2 percent in 2014. Its growth forecast for this year is 6.4 percent, well above that of the global growth rate of 3 percent. Last year’s election saw Narendra Modi voted in as Prime Minister, leading a government focused very much on expanding opportunities in India and cultivating its status as a business hub.
Meanwhile, the bubble in China is bursting; figures released in August show that factory output has shrunk to its lowest in six years, and its national debt stands at 282 percent of its GDP. The social demands of such a large nation, including welfare and medical treatment, are rising faster than the country’s GDP could ever hope to fund. Could this be India’s time to move out from the shadows?
One of the biggest forms of encouragement for investment in India is the Modi’s economic reforms.
His new programme, Make in India, is designed to facilitate investment, foster innovation and enhance skill development. It includes plans to improve the country’s infrastructure and create five smart cities in progress as a part of the Delhi-Mumbai Industrial Corridor, as well as high speed train projects.
In January, Modi’s cabinet okayed plans to auction mineral rights, to increase transparency and boost government revenue; as well as attracting new investors. The new regime, besides incentivising technology assimilation by the Indian mineral industry, is also expected to boost raw material security to consumer industries like steel and aluminium makers.
Modi also has plans to infuse Rs.70,000 crore of capital into India’s state run banks over the next four years. The decision to infuse such a large amount in state-owned banks, which roughly account for 70% assets of India’s Rs.92.5 trillion banking industry, is a signal that the government cares for the
If further proof of the country’s potential is needed, several multi national corporations have recently moved operations or set up subsidiaries in India, including Amazon, Starbucks, Uber, Foxconn and even the US presidential candidate Donald Trump.
However, India did not remain unaffected by Monday’s crash, with its benchmark index Sensex, falling 1,625 points—its biggest single day fall ever. However it appears to have followed the example of European indexes and rallied slightly, up around 2 percent today.
Whilst Modi has plenty of ambitious plans for India’s economy, many of them are yet to be put into motion. India’s monsoon season parliament session has just closed – without a single law being passed; and they need to be, to attract the investment Modi wants. India’s business infrastructure is notoriously behind other countries, with applications to register a new business taking 30 days, as opposed to the 2.5 days in Australia. Similarly, may argue that their tax laws are out of date and even amount to ‘tax terrorism’. India’s has had several highly publicised battles with local subsidiaries of foreign businesses, including Vodafone, Nokia, and more recently Nestle, which have attracted global scrutiny and perhaps put off potential investors.
According to here’s no doubt that the slowdown in China provides India with opportunities to expand, but it means that India must act fast to exploit the advantage; whilst investors remain fearful of China’s short-term future, now is the time to strike if India wishes to knock China from the top spot. For further information on how to make the most of the opportunity, read our free guide to investment in India here.
Aldermore Group up 8 percent on half yearly results
Aldermore Group (LON:ALD) are trading up 8 percent this morning after releasing strong half yearly results.
The company, who specialise in lending to small and medium enterprises, disclosed an 109 percent increase in underlying profit before tax at £44 billion.
The net amount loaned to customers was up by £635 million in the first half of 2015, £5.4 billion.
The underlying return on equity increased to 18 percent from 11.7 percent in the same period last year.
The company recently listed on the London Stock Exchange and joined the FTSE 250.
CEO Phillip Monks said in a statement:
“These excellent results give us great confidence for the rest of 2015 and beyond. We remain committed to delivering strong, sustainable returns to shareholders.
“We’re excited by the significant ongoing growth opportunity presented by SMEs and homeowners, who we believe continue to be underserved by the wider market. Our track record and the great customer feedback we receive demonstrate that we’re exceptionally well placed to continue to support these customers and grow the business.”
Alternative business finance: pension-led funding
Since banks have cut down on their lending, it’s no secret that SMEs and start-up businesses have been forced to look at alternative finance options to grow their business. Peer-to-peer lending such as crowdfunding has gone from strength to strength on the back of this, growing over 100 percent each year for the past three years. However, it is not the only form of alternative finance out there, and other methods have arguably been overlooked in the past. One of these is Pension-Led Funding – using a pension pot to generate a loan for your business.
Essentially, it’s all about making your pension work harder; it allows business owners to borrow funds from an existing pension and invest them in their company. Business owners will first need to move their retirement funds into a self-invested pension (Sipp) or a small self-administered scheme (Ssas). These are the most flexible types of personal pension which can fund either a commercial loan from the pension scheme to the business, or the purchase of intellectual property.
The difficulty in getting a traditional loan or investment is convincing the bank that your business is worth taking a chance on. However, with pension-led funding, you take on the risk yourself by loaning your pension fund to use as capital.
Furthermore, unlike taking a loan from a bank, there’s no risk of losing your home or being hit with charges should you default. The flexibility and independence is what makes pension-led funding such a viable option for many small businesses.
However, there are some downsides. It is recommended that there be around £50,000 in the pension pot for this form of funding to even be worth considering. Clifton Asset Management advises that the maximum loan from a SIPP should not exceed 60 per cent of the total pension pot, and regulation dictates that for an SSAS loan, it should not exceed 50 per cent.
Pension-led funding will not necessarily be the quickest way to access funds; the process usually takes between six and twelve weeks. And of course, the biggest thing to remember is that should the business fail and the loan be unable to be repaid, you risk losing a significant chunk of your pension.
Rapid Retail, a company who hire portable retail units for shows, exhibitions and matches, chose pension-led funding to expand their business. Founder Nick Daffern wanted to grow the business, but believed getting a loan from the bank would be a waste of time. He said:
“Times have changed and it’s all about finding appropriate tools for the type of finance you need. We knew about the alternative funding sector and had even used it before we were contacted by Clifton Asset Management. They talked to us about pension-led funding and we thought it was an absolute win-win because we could invest in our business while gaining tax effective pension growth – the perfect solution.”
Nick and co-founder Andy Moss transferred their £130,000 pension pot into an SSAS. Taking £100,000 from their pension scheme, they invested the money directly into expanding the business – and they’re very happy with the decision.
“We’ve set our pension repayments at around 7%; a far better return than we’d seen from our regular pension providers and it’s
highly tax-efficient for Rapid Retail.”
Charlotte Dean worked as a personal trainer and Pilates instructor for 19 years, before setting up Careers in Fitness, which provides training and qualifications within the sector.
“I chose pension-led funding instead of a bank loan because it allowed me to invest my own money into a business I totally believed in.
“By monetising the Intellectual Property value held within Careers in Fitness Global, I was able to utilise an asset class that many businesses would not recognise. It was also reassuring that IP has been widely recognised as an appropriate pension investment by HMRC for almost 10 years.”
When looking at finance options for your business, pension-led funding may not be the first route that springs to mind. However, if the idea of putting your own money into your business without reliance on banks or other investors, it’s well worth considering.
For more information on how to get started with pension-led funding, pensionledfunding.com
Miranda Wadham on 27/08/2015
Oil prices rally after strong market open
Oil prices rose more than $1 a barrel on Thursday after stock markets began rallied across the globe.
Monday’s meltdown in China pushed oil price down further on worries that demand from China would dry up. However, Brent, was up $1.50 at $44.64 at open this morning and U.S. crude was up $1.50 at $40.10 a barrel.
Oil markets moved up from six-and-a-half-year lows reached earlier this week, but worries of oversupply and a lack of demand continue to render the future uncertain.
Several large oil companies have made cutbacks in the light of the crisis, with Total announcing today plans to sell its assets in the North Sea.
“The trend is strong and down. However, do not be wrong footed by a correction higher,” PVM Oil Associates technical analyst Robin Bieber told Reuters. “Few markets head forever in one direction with no respite.”
House price growth slowest for two years
UK house prices rose at their slowest pace for more than two years, according to mortgage lender Nationwide.
House prices rose 3.2 percent year-on-year in August, compared with a 3.5 percent rise in July.
However, Nationwide’s chief economist Robert Gardner noted the importance of increasing construction:
“However, survey evidence cautions that this trend may not be maintained unless construction activity accelerates.
“Surveyors reported the lowest ever number of properties on their books in July – on data extending back to the late 1970s – whilst new buyer enquiries picked up.”
Rival mortgage lender Halifax’s figures show a faster pace of growth then Nationwide’s, although theirs has also slowed significantly. Halifax reported earlier this month that house prices across the UK were rising at 7.9% a year; however both lenders use different methods to achieve their results.
Global stocks rise as China closes up 5 percent
China’s markets showed tentative signs of recovery today after the Shanghai Composite closed up 5 percent higher at 3,083.59, restoring confidence in the global markets.
In early European trading, both the FTSE 100 and Germany’s DAX were up more than 2 percent. Shares on Wall Street also saw their biggest rise in four years.
US Federal Reserve official William Dudley also commented that the recent events may be enough to push back a rate rise from the expected September date, lifting the mood further.
Oil prices are also see a hike from their rock bottom prices as market volatility begins to calm.
Net migration at highest level ever
Net migration to the UK has reached its highest level yet, according to figures released today by the Office of National Statistics.
In the year to March net migration was 330,000, compared to 236,000 in the same period a year ago.
The figure is the difference between those leaving the country and coming in, and is three times the target set by Prime Minister David Cameron in 2010.
Immigration Minister James Brokenshire said it was “deeply disappointing”.
The figure was fairly evenly split between those coming in from the EU and those from outside the Union. Net migration of EU citizens was 183,000, with the figure from other countries standing at 196,000.
Former government advisor tweets dire Black Monday warnings
The former special advisor to Gordon Brown has taken to Twitter to issue a warning about the future of the economy, after Black Monday’s catastrophic stock market slide.
In a series of ominous tweets Damien McBride cited the need to stock up on “canned goods and other essentials”, apparently in preparation for the upcoming apocalypse.
Advice on the looming crash, No.1: get hard cash in a safe place now; don't assume banks & cashpoints will be open, or bank cards will work.
— Damian McBride (@DPMcBride) August 24, 2015
Crash advice No.2: do you have enough bottled water, tinned goods & other essentials at home to live a month indoors? If not, get shopping.
— Damian McBride (@DPMcBride) August 24, 2015
I'm presuming the Central Banks will intervene to stop this market slide but that will just make the eventual, inescapable crash even worse.
— Damian McBride (@DPMcBride) August 24, 2015
For 18 months, the first thing I've done waking up on a weekday is search 'Shanghai Composite' on Twitter. This has been coming a long time.
— Damian McBride (@DPMcBride) August 24, 2015
He then calls the Fed’s handling of the markets “madness”, insinuating stabilizing measures are the equivalent of “putting a dummy in.” Mr McBride was special adviser to Gordon Brown and head of communications at the Treasury for a period during the last Labour government Chinese shares dropped further on Wednesday, totalling a total market fall of 16 percent over the past three days. The FTSE rallied somewhat this morning, but dropped down 0.8 percent in afternoon trade.Today is just the stock market catching up with the terror over defaults that's been gripping the bond market for months.
— Damian McBride (@DPMcBride) August 24, 2015
Miranda Wadham on 26/08/2015