Before the bell: Pressure mounts to cut dollar interest rates

The earnings season continues at full speed in Europe. In Amsterdam, holding company Prosus was among the strongest performers, rising 3.7 percent thanks to its stake in Chinese gaming company Tencent, which reported strong quarterly results. In the US, pressure on Federal Reserve Chair Jerome Powell to lower interest rates is increasing. US Treasury Secretary Scott Bessent told Bloomberg in an interview that rates should be cut by at least 150 basis points. The US ten-year yield fell 5 basis points to 4.23 percent, lifting the S&P 500 (+0.3%) to a new record close. This morning in Asia, Japan’s Topix Index fell 1.1 percent while Hong Kong’s Hang Seng Index dropped 0.3 percent. Bessent’s comments sent several Asian currencies higher against the dollar, putting pressure on regional stock indices. Later today, investors will watch the reaction to quarterly results from network equipment maker Cisco, whose earnings exceeded expectations, with AI infrastructure orders surpassing 800 million dollars. Orders for AI-related projects in 2025 are already double the company’s original target.

Belgian palm oil producer Sipef appears to be heading for a record year, with both production and net profit expected to be significantly higher than last year. Self-storage operator Shurgard saw revenue rise 17 percent and confirmed its outlook. Retail park landlord Ascencio also delivered a strong report: it had leased five properties to the now-bankrupt Casa, but already signed new tenants for four of them. Investors will also be able to react to figures from property developer Nextensa, which lowered financing costs by 15 basis points and posted a sharp increase in annual profit. This afternoon, markets await results from Applied Materials and construction equipment maker Deere.

Boring is sexy

The most boring real estate company on the planet? There are many candidates, but we’d like to nominate Ascencio. Few investors in Flanders have heard of this company, yet it holds a property portfolio worth 750 million euros. The fact that it is headquartered in Gosselies, Wallonia, probably explains why it gets less attention from Flemish investors—there’s an unwritten rule that Walloon companies receive less coverage than Flemish ones. The company specializes in so-called retail parks—shops located along major roads, far from city centers. The advantage is that rents can be kept low, while even in times of crisis, Ascencio tends to attract high-quality tenants. Around 40 percent of tenants are in the food sector, such as supermarkets, but also DIY and decoration chains like Brico. It also rented five stores to the bankrupt Casa chain, with four of those already re-let. Ascencio is particularly appealing to investors seeking a stable dividend stock. With a gross dividend of 4.30 euros per share, the gross dividend yield is currently around 8.5 percent, and the company has kept the dividend stable for years.

We prefer REITs

When investing in listed real estate, it’s important to check whether the company is a regulated real estate investment trust (REIT) or a property developer. Belgian REITs—known locally as gereglementeerde vastgoedvennootschappen (GVV’s)—are bound by strict rules on leverage and dividend policy. Failure to comply results in the loss of both REIT status and its favourable tax treatment. Nextensa was originally a REIT but gave up that status after a merger, becoming a property developer instead. Our skepticism toward developers is easy to understand: just look at the share price performance of Banimmo, Atenor, or Nextensa in recent years. Developers can deliver strong profits in good times by building and selling properties, but when the cycle turns, losses of 50% (Nextensa) or even 90% (Atenor) from their peaks are not uncommon. For Nextensa, better times seem to be returning: its latest quarterly results show a sharp reduction in leverage and a strong rise in profit. Still, we remain fans of REITs—something we’ll cover in Lesson 5 of our upcoming Hammock Investing course.

Did you know…

Palm oil company Sipef has been listed on the Belgian stock exchange since 1920? Its shares were once traded on the exchanges of Antwerp, Brussels, Geneva, Amsterdam, and Rotterdam!

This article was translated from Dutch and was originally published on Spaarvarkens.be.