Shares rebounded by more than 2% in Japan today as investors expect Prime Minister Abe to announce snap elections as soon as this evening. With the economy officially in recession, he is also expected to delay another consumption tax increase.
Eleanor Warnock of the Wall Street Journal's Tokyo bureau says yesterday's figures on the economy came as a huge surprise to everyone in Japan. Ms Warnock said that no economist or no-one in the Japanese government had expected that the country's GDP would fall at an annualised 1.6% pace in the three months from July to September. Economists are now predicting that the Japanese economy will see only flat or negative growth for the full year that ends in March. They also predict that the Prime Minister will hold off on the country's next rise in sales tax, which had been due in October of next year, the journalist adds.
***
Hibernia REIT has results out this morning for the six months to the end of September. Hibernia is a trust which is listed on the Irish and London Stock Exchanges and which invests in Irish commercial property. There is nothing to compare the results to as Hibernia was not listed last year. It said the six month period to September was an active time for the company with €397m invested and €78m committed to 12 Dublin properties.
Kevin Nowlan is chief executive of WK Nowlan, which is contracted to run Hibernia for the next five years. Mr Nowlan says that it is incredible to think that this time last year, Hiberia REIT did not exist but that in the last nine months, it has invested almost €0.5 billion in mainly Dublin offices as well as a small residential scheme in Dundrum. The REIT's portfolio has grown in value by about 10% and it successfully raised €300m from its shareholders recently.
Mr Nowlan explains that REITs are long term equity focused purely on property. He says the company's strategy from day one was a rental growth story in Dublin, and at the moment its portfolio is yielding about 5.8% after rent freeze burnoff. The company is also seeing significant growth on the capital side, mainly down to rental growth Hibernia is seeing on the ground. He points out that prime rents in the recession fell to about €25 a foot, and have since risen to about €45 a foot. The average rent from its portfolio of offices is about €35 a foot.
The big implication of the recession and the decimation of the development community and the lack of long term bank funding has resulted in very limited development on the ground and Mr Nowlan says that as a consequence, rents are going to exceed expectations and will grow in excess of €50 a square foot. He believes this will not hit the city's competitiveness as salaries and housing are bigger considerations for companies.
***
MORNING BRIEFS - Finance Minister Michael Noonan has warned people off buying shares in AIB, saying that if they do they will lose money. The Minister was speaking at the relaunch of AIB's branch on O'Connell Street in Limerick. He said shares in the bank are overvalued. Spelling it out - he said that the value attributed to the shares in the stock market at the moment would put a nominal value of €55 billion on AIB. The bank is not worth that, he said. He added that the shares are overvalued but it is because of the banks' restructuring. He issued of a warning to investors to wait until the group is restructured before buying. "If you buy now you will lose money," he stated. Mr Noonan also said that a plan to restore AIB to the private sector would be announced before Christmas. He said that will take a number of years of restoring the bank to the private sector through a public selling of the shares.
** Paddy Power has a trading statement out today, which states that in the second half of the year to date, strong revenue growth has continued in all of its businesses. Paddy Power says the company is benefiting from good growth and favourable sports results. The board now expects mid to high teens percentage growth in earnings per share for the full year.
