02 Dec 2019

Glenveagh Properties: Completes sale of Herbert Hill for €55m+

Glenveagh has completed the sale of its 90-unit apartment development at Herbert Hill, Dundrum to an institutional investor for a gross price “in excess of €55m”.

The sale price is slightly ahead of our expectations (and media reports earlier this year which had mentioned a price in the region of €50m), although this is not a surprise given the strong demand that exists in the market for high-quality PRS assets and the relatively short supply of same. As well as the favourable price achieved, the delivery of the asset on schedule is welcome given the space-constrained nature of the construction site which is nestled amongst Luas (light-rail) tracks, a 200-year old protected structure and Dundrum Town Centre, the country’s largest shopping centre.


Considered alongside the recent on-schedule completion of 118 houses for IRES REIT across two north Dublin sites and indicators suggesting that demand in the first-time buyer segment remains healthy, this transaction strengthens our expectation that the group will meet its target of 725 completed sales this year.


Irish Economy: Manufacturing PMI back below 50


The manufacturing sector returned to contraction in November, according to the latest AIB Ireland Manufacturing report.


The headline Manufacturing PMI fell to 49.7 in October from 50.7 the previous month – this is the fifth month in the last six that the PMI has been below 50, the point which indicates that the sector is contracting, although the decline indicated by today’s report is marginal. Central to the latest deterioration was a renewed decline in production levels with output falling slightly in November. However, pulling in the opposite direction, inflows of total new business continued to increase during November but, again, the rate of change was small. International conditions are still working against the sector at present with export sales falling in November, and at a faster rate than previously. Responding to the softer demand conditions of recent months, Irish manufacturing employment decreased in November, the first decline in more than three years.


On the whole, while it is disappointing to see the Manufacturing PMI dip below 50 again, the sense from today’s report is that conditions in the sector are broadly flat at present. Encouragingly, sentiment in the sector improved in November to the highest level in five months and firms continue to expect output growth over the coming year.


Irish Economy: S&P upgrades Ireland


S&P raised Ireland’s credit rating on Friday to AA- with a Stable outlook, the highest rating provided by the three main ratings agencies.


This is the fourth ratings upgrade since 2014 from S&P but the first since June 2015 and puts Ireland’s S&P rating just one notch behind the likes of France, Belgium and the UK. The ratings agency cited the government’s “substantial” fiscal buffers and growth and employment levels that rank “among the strongest in the developed world.” While obviously welcome, with Ireland’s 10-year sovereign debt trading with a yield not much above zero, it is easy to contend that the ratings agencies are “behind the curve” (and not for the first time).

 

UK this week


The weekend saw no less than six polls being released, the bottom line of which seems to be that Labour appears to be gaining some support at the expense of the other parties, whilst the Tory party vote share remains more or less unchanged.  The FT’s poll of polls continues to point to an 11% lead, with the Conservatives on 43% and Labour on 32%, however the polls over the weekend have ranged from as little as a 6% (BMG) lead to 15% in an Opinium poll. 


Looking forward into this week the key event is likely to be the head to head debate on Friday between Boris Johnson and Jeremy Corbyn, whilst it remains unclear how Friday’s London Bridge events will influence the election.

 

US this week


Stateside the November ISM is due later today and the non-manufacturing ISM on Wednesday. Meanwhile the final estimates of both the UK and Euro area composite PMIs will be due, where we expect both to be unrevised at 48.5 and 50.3 respectively. 


More broadly the key release of the week will be the US employment situation report and in particular the non-farm payrolls print. We expect 185k jobs to have been added in November, a rebound from 128k seen in October, which was impacted by strike action at General Motors. Other US figures of note are the ADP employment survey and Michigan consumer sentiment.


Europe this week


Within the Euro area perhaps the most widely watched data will be the German new manufacturing orders and industrial production figures for October. The key question here is whether there are any tentative signs of stabilisation in the industrial sector in the final quarter of 2019. The German figures have been mixed in recent months, but for the Eurozone as a whole the last two months have witnessed consecutive gains in industrial output for the first time since Q1. Industrial figures will also be due from Spain, whilst the final estimate of EU19 GDP growth for Q3 will be published on Thursday.


ROTW this week


China PMI data released over the weekend have surprised on the upside. Notably, the official CFLP manufacturing PMI rose from 49.3 to 50.2 in November, well above the 49.5 consensus and taking the series into expansionary territory for the first time in seven months. Additionally, the Caixin manufacturing PMI firmed marginally from 51.7 to 51.8 (consensus 51.5) to represent the fastest pace of expansion since December 2016. Meanwhile, the non-manufacturing PMI rose from 52.8 to 54.4 (consensus 53.1). Overall, the data suggest that China’s economy remains resilient to the trade dispute, with the Shanghai Composite eking out a 0.1% gain today on the back of the figures. 


Monetary policy decisions are due from the RBA and the Bank of Canada, neither are expected to see any change in policy. But a close eye will be kept on the policy statements and comments, particularly the RBA, where recent market chatter has focused on the possibility of QE at some point.


Economic Releases


EU 09.00 Manufacturing PMI

UK 09.30 Manufacturing PMI

EU 14.00 Lagarde testifies to EU Parliament

US 14.45 Manufacturing PMI

US 15.00 ISM Manufacturing index