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FTSE falters on Chinese data while British Land warns on Brexit

Discussion in 'Market News' started by Lily, May 16, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    Investors cautious after Chinese figures and uncertainty over EU referendum

    Leading shares are heading lower despite a higher oil price, following disappointing Chinese data over the weekend.

    British Land is among the main fallers after its final results, with its net asset value missing expectations and a warning about the uncertainty in the market ahead of the EU referendum vote. Chief executive Chris Grigg said:

    We remain confident in the underlying strength of the business despite continued global macro uncertainty and the potentially adverse impact of a vote for the UK to leave the European Union.

    Net asset value is a small miss versus Numis estimate (927p) and consensus (935p). The key driver to the uplift was capital value growth of +6.7%, split +6.4% on standing investments (first half +4.5%; H2 +1.9%) and +9.4% on developments. While the pace of capital growth slowed through the second half (pre changes to stamp duty land tax), this was not unexpected as we forecast only a small further yield shift.

    The FTSE 100’s rollercoaster ride continues, starting the week with a quick dive, unwinding an impressive rally Friday afternoon.

    Data out of China over the weekend disappointed at every level - industrial production, retail sales and investment growth. The dollar is stronger on last weeks better US retail sales, and oil has surged to a six-month high after Goldman Sachs nudged forecasts higher.

    We incorporate BHP’s recent growth presentation highlighting latent “options”. Many are already assumed in our modelling but key new cost guidance (better than expected) assists our base case forecasts. We assume 2017 capex at $5.3bn (greater than the $5bn guidance) allowing for clearly anticipated approvals.

    A rare entry point for Pru shares. Despite the headwinds (Asia, US Dept. of Labor, M&G) we expect near-term earnings per share growth rate three times that of sector. We see longer-term prospects as undimmed.

    We reduce our Pru price target, reflecting current peer group multiples.

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