Before the Bell: Fitch downgrades France

After Fitch cut France’s credit rating, the question is whether this will push borrowing costs even higher. Investors are waiting for the first rate decisions from the central banks.

This weekend, French companies L’Oréal, Airbus, and Axa featured prominently in the Financial Times. Why? The British business daily noted that yields on French government bonds are now higher than on comparable debt issued by those companies. Just a few years ago, no French company could claim such a dubious distinction. But recent political turmoil has pushed French yields higher. Now, with Fitch lowering France’s sovereign rating to A+, investors will be watching closely to see if yields rise further. In the U.S., vaccine makers Pfizer (-4%), Moderna (-7.4%), and BioNTech (-7.3%) tumbled Friday after rumors surfaced that the deaths of 25 children could be linked to Covid vaccines. Still, the S&P 500 managed to extend its rally and finish near record highs.

In Asia this morning, Chinese automaker BYD (+4%) rebounded after months of weakness, driven by a domestic price war. Japanese markets are closed for a holiday, while the rest of Asia shows little movement. Investors appear to be holding fire ahead of the Federal Reserve’s rate decision on Wednesday. The Bank of England, the Bank of Japan, and the Bank of Canada will also announce policy decisions this week. In the Netherlands, real estate group CTP goes ex-dividend today, while coffee machine maker Fountain reports quarterly results.

The unknown real estate giant from the north 

In Belgium, investors in logistics real estate usually think of WDP (Warehouses De Pauw). But did you know there is a much bigger player in the Benelux that is almost unknown in Flanders? That company is CTP, led by Remon Vos. Listed in Amsterdam with a market capitalization of 8.8 billion euro, it is larger than WDP (4.9 billion euro) and develops and manages millions of square meters of business parks across Central and Eastern Europe. Sustainable bond investors know CTP well: in 2021, it was the largest issuer of ESG-certified bonds in the European real estate sector. Belgian investors often ignore Dutch real estate firms because of the double dividend tax. A tip? If you opt for CTP’s stock dividend, it is exempt from the 15% Dutch dividend withholding tax (cash dividends are not). Today, the stock goes ex-dividend for 0.31 euro per share.

Investing in Southeast Asia?

The Far East is going through turbulent times. While Western markets sit at record highs and Chinese markets have begun to rally, several countries in the region are struggling. India is suffering from its tariff war with the U.S., making the rupee Asia’s weakest currency. Indonesia faces similar issues, with its economy slowing. The government is stepping in with free school meals and a 12 billion dollar stimulus package to support growth. The unrest is tangible: the country is experiencing its largest protests in over two decades. A brighter spot? Thailand. Recent months saw political uncertainty and even the threat of conflict with Cambodia, driving the Thai SET50 index down 27% between October and June. Now that stability has returned with a new prime minister and the threat of war has receded, the worst may be over. A fresh government stimulus program should also support the economy. Next week, in lesson 4 of Spaarvarkens’ ETF course, we’ll explain how to invest in specific regions through ETFs.

Did you know…

that Japan is celebrating Respect for the Aged Day today, a national holiday? Families honor their elders by giving gifts, calling, visiting, and preparing special meals to recognize their wisdom and contributions to society.

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