Watch Series

Americas Watch - October 2017 

The U.S. economic expansion continues to move in stride with a generally favorable outlook.  In the third and final reading, Q2 2017 GDP came in at 3.1% q-o-q annualized.  That’s quite impressive, but most economists do not think this pace of growth is sustainable.  Both the manufacturing and service sectors, per the ISM manufacturing and non-manufacturing indices, have displayed strong performance, with the manufacturing index at its highest level in over six years.  Additionally, there has been a pronounced pickup in business investment and exports, supported by stronger energy activity, an improved global backdrop and a weaker U.S. dollar.  Consumer spending has been robust recently, despite the fall in August.  However, with spending increasing faster than wage growth, retail sales may stall going forward if wage gains fail to accelerate.  While the near-term outlook for the economy is fairly positive, uncertainly is plentiful.  On the upside, policy stimulus from the administration and Congress, be it from reworking the tax codes or infrastructure spending, could provide a boost in the coming quarters.  Conversely, a confidence-shattering escalation of tensions with North Korea, as well as anti-immigrant and anti-trade legislation, could sap U.S. economic momentum.

 

Europe Watch - October 2017


The outlook for France has improved since President Macron’s party managed to secure a parliamentary majority in the national assembly. The President has an ambitious reform agenda which is pro-business and pro-EU. Although Macron’s popularity has slid recently, the French economy is continuing its positive trend with sustained GDP growth and improving business and consumer confidence. The number of international visitors to the country is also starting to recover, supporting a positive outlook for the leisure and retail sectors. The encouraging macro fundamentals are also evident in the Paris office markets. Take-up rose to its highest levels since the financial crisis. Net absorption has been positive for nine consecutive quarters, and vacancy rates in Paris are on a downward trend. Although French property appears attractive at the moment, transaction data shows that the market is dominated by local investors. French SCPIs, a type of retail property funds, are an illustration of the dominance of domestic capital. These funds are pricing out foreign investors due to their low cost of capital, tax-efficient structure and general comfort with the French market.

 

 

Asia Pacific Watch - October 2017

Following subpar economic performance in 2016, Singapore’s economic prospects have brightened thus far this year. Its GDP expanded by 2.7% y-o-y in Q2 2017, following a 12.3% surge in Q1. Manufacturing was the dominant force behind the improved macro figures, particularly the electronics sector, which grew by a massive 49% y-o-y in Q2 as a result of high demand for semiconductors. Singapore’s commercial and residential real estate has been in the doldrums for the last few years, with falling rents and generally weak occupation indicators. Fairly strong supply additions have coincided with these weaker demand-side drivers. But in the real estate sector too, we have noticed a turning point. Following a weak 2016 when Singapore’s real estate delivered a modest 4.8% unlevered total return (with 4.9% from income and -0.1% from capital returns) according to MSCI, fundamentals appear to be set for a better out-turn in the coming five-year period.

 

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