TheChek News Flow

New home values climb at fastest pace in 21 months but uneven consumer recovery clouds outlook

Prices of new homes in China rose at the fastest pace in 21 months in March, in the latest sign of green shoots for the world’s second-biggest economy as it recovers from three years of pandemic restrictions and Beijing eases up a crackdown on the debt-laden property sector.

New home prices rose 0.5 per cent on the previous month, according to official data, following a 0.3 per cent increase in February.

The positive data signalled some relief for China’s ailing property sector, which has suffered a liquidity crisis over the past two years, and followed better than expected export figures released last week, as China’s trade was buoyed by shipments of electric vehicles and their components as well as an increase in trade with Russia.

The encouraging data came ahead of China’s first-quarter gross domestic product figures, set for release on Tuesday. Economists polled by Reuters forecast growth of 4 per cent for the first three months of the year as Beijing chases a full-year target of 5 per cent.

The People’s Bank of China on Monday kept its one-year medium-term lending facility rate — which sets the floor for the country’s benchmark interest rate — at 2.75 per cent. Analysts said the lack of easing from the central bank suggested that the first-quarter GDP data was expected to be on target.

China posted GDP growth of just 3 per cent last year, falling short of a 5.5 per cent target that was already the lowest in decades and raising concerns about a structural slowdown in the economy’s expansion.

“If the GDP report [for the first quarter] comes in close to market expectations then the speed of the economic recovery is on track,” said Iris Pang, chief greater China economist at ING. She added that with growth forecast to continue rising in the second quarter, “we expect the PBoC to keep interest rates unchanged”.

Nomura analysts noted on Monday that electricity consumption growth had increased “markedly” to 5.9 per cent year on year in March, from 2.3 per cent over the first two months of the year.

This was evidence that China’s economy had entered a “sweet spot” in the wake of Beijing suddenly dropping President Xi Jinping’s zero-Covid controls in late December and backing off from property sector tightening, they said.

Still, Beijing’s growth target for 2023 is the lowest in decades, and economists have warned of an uneven recovery despite the fledgling signs of improvement in exports and the property sector.

One crucial area of concern for the pace of the recovery is the strength of consumer services, a driver of economic and jobs growth for the country of 1.4bn.

China last week reported softer than expected consumer price data, with a 0.7 per cent year-on-year increase for March, trailing forecasts of 1 per cent.

Citi said the weak inflation result signalled that “this year’s consumption recovery will be a recovery of two halves”.

“Services recovery is steady, but it’s not a supercharged rebound,” the US bank’s analysts said. “Meanwhile, goods consumption could be struggling with the payback of stimulus support, especially for autos,” they added, noting that it “could also take some time for the property stabilisation to benefit related downstream consumption”.

Ecommerce group’s shares surge more than 40% after approach

THG’s shares jumped more than 40 per cent on Monday after the ecommerce retailer revealed it had received a takeover bid from Apollo.

The company, formerly known as The Hut Group and which owns websites Lookfantastic and Myprotein, did not disclose the terms of the preliminary proposal and made no further comment.

Apollo must make its intentions clear by May 15 or walk away, THG said in a statement on Monday. The announcement pushed the shares up 44 per cent to 95p, valuing the company at £1.2bn, a day before it posts annual results.

It comes following months of speculation about the group’s future as a listed company after it floated with great fanfare in London in 2020 at an opening valuation of about £5.4bn — the largest IPO in the country since 2017.

However, co-founder and chief executive Matthew Moulding, a prolific social media user, said this month that he “wouldn’t recommend” listing on the London Stock Exchange.

“The way we’ve been treated since joining the LSE has done nothing but add fuel to our insatiable fighting spirit,” he wrote on Instagram. “It’s certainly not an experience I’d recommend to anyone, but it’s been a decent test of our start-up mentality.”

He previously said he would give up his “golden share” in the business to allay concerns about corporate governance, but he has yet to do so. This gives the entrepreneur, who still owns about 25 per cent of the company, the power to veto any takeover deals.

THG has previously been subject to takeover interest from a range of investors, including property tycoon Nick Candy and THG non-executive director Iain McDonald, seeking to take advantage of a share price that has plunged over the past 18 months. A year ago THG rejected a bid from investors Belerion Capital and King Street Capital Management that valued the company at £2bn. 

The retailer has also come under pressure from activist investors such as Kelso, which has bought a stake and sees the current share price as trading at a discount. In particular, Kelso has argued that THG’s nutrition business, which includes the Myprotein brand, could alone be worth more than the company’s entire market capitalisation.

Sparta Capital, founded in 2021 by former Elliott Management portfolio manager Franck Tuil, also has a stake in THG.

A person close to Sparta argued that Apollo’s interest in THG wasn’t surprising since the company is significantly undervalued but any offer would have to come with an outsized premium to make sense.

Apollo did not immediately respond to a request for comment.

The group’s interest in THG is the latest example of private equity groups seeking to take UK companies private.

In the past week, credit card processor, London-listed Network International Holdings and Dechra Pharmaceuticals have announced that they are fielding interest from buyout firms including CVC Capital Partners and EQT. Apollo has also been involved in long-running talks to take energy services business Wood Group private. 

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Mission represents important step in billionaire’s quest to bring humans to Mars

Elon Musk’s SpaceX is set to make its first attempt to launch its huge Starship rocket into space, marking what could be an important milestone in the billionaire’s bid to carry astronauts to Mars.

SpaceX said on Sunday that the rocket could be launched from its base in Texas during a 90-minute window beginning on Monday. If the rocket is not ready to launch during that window, SpaceX has alternative launch times available later in the week.

On Sunday, Musk sought to lower expectations for the launch attempt. In a discussion broadcast on Twitter, he warned that many issues could delay the launch or cause the rocket to fail. “Just don’t blow up the launch pad,” he added.

If the launch is successful, the rocket would reach an altitude of 150 miles and complete a 90-minute trip, ending in a splashdown in the Pacific Ocean off Hawaii. SpaceX will not attempt to recover either of the rocket’s two stages — its Super Heavy booster and the Starship on top that will one day carry crews to space — though eventually those parts will be designed to be reused.

Powered by 33 of SpaceX’s Raptor engines, the rocket is set to become the most powerful ever to be launched into space. The company has said it will have more than 16mn pounds of thrust, roughly twice that of the previous record holder, the Saturn V rocket that carried Americans to the moon in the 1960s and 1970s.

Starship was designed to take humans to Mars, the purpose that Musk set for SpaceX when he founded the company in 2002.

Long before then, Starship was co-opted by Nasa to take part in the first attempt to return astronauts to the moon since 1972. With the ability to carry payloads of as much as 100 tons, Starship could also transform the economics of reaching orbit, challenging SpaceX’s own Falcon 9 rockets as the main workhorse for reaching space.