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Nicholas Spiro
Nicholas Spiro
Nicholas Spiro is a partner at Lauressa Advisory, a specialist London-based real estate and macroeconomic advisory firm. He is an expert on advanced and emerging economies and a regular commentator on financial and macro-political developments.

Office markets in Asia are performing well and the shift to hybrid working has had less of an impact, yet investment in the sector has fallen sharply. Asia’s office markets need a stronger narrative, one that differentiates the sector more clearly from its counterparts in the US and Europe.

Bitcoin has staged a comeback from a difficult 2022, with its price rising higher than US$73,000 on the back of support from US regulators. The approval of spot bitcoin ETFs is driving interest but also raising fears of the cryptocurrency losing its status as an unregulated, decentralised product.

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The end of more than a decade of cooling measures for Hong Kong’s property market is welcome and has sparked a surge in new home sales. These changes must be put in proper context, though, as several other factors will be more consequential in setting the property sector’s course.

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Li Qiang admitting Beijing will have a hard time delivering on its pledge of 5 per cent GDP growth is a wild understatement given China’s economic struggles. The government’s policy response has been piecemeal, equivocal and confusing, frustrating investors and sapping confidence among domestic consumers.

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Deteriorating affordability has left many Australians struggling in the housing market, but foreign buyers’ interest remains strong. Record migration, China’s housing crisis, Australia’s stability and Asian private wealth’s influence are driving the surge.

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Just months after investors were convinced interest rates would come down sharply this year, expectations have been significantly reduced. The experience of Australia and New Zealand shows that when inflation remains sticky and employment holds up, there is little room for central bankers to consider rate cuts.

Given the bleak domestic and external backdrop, the strong performance of China’s commercial real estate investment market is remarkable. It shows that a solid domestic investor base, a sharper repricing of property values and policy support for key sectors can make a difference.

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The Magnificent Seven’s dominance of US stocks and its outsize impact on the performance of global equity markets has amplified fears of a new tech bubble. These fears ignore that the grouping is built on sound fundamentals and is driving structural mega trends rather than being a threat to financial stability.

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While Donald Trump has taken credit for the fall in Chinese stocks, the truth is that domestic, not external, factors are at play in China. Instead, the focus should be on Trump’s threat to US democracy, the rule of law and the credibility of American economic policy should he be re-elected.

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Compared to markets in the US and Europe, both prices and rental yields have been slow to adjust. As a result, affordability has taken a hit and investors are thinking twice. Yet Asia’s strong underlying fundamentals are undoubtedly an asset.

Despite the gloom, there is a glaring lack of consensus about the outlook as Beijing signals more aggressive support. Critically, Wall Street banks are not ready to give up on China.

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Given high borrowing costs, cooling measures and a surge in private home completions, it would be astonishing if Singapore did not see a slowdown. While the property sector is losing momentum, it is the kind of slowdown landlords and investors in most other markets would envy.

Concerns about the reliability and quality of economic figures in China are well known, but unease exists beyond Beijing. In the US, partisanship is skewing the data, so much so that it is shaping the economic narrative and exerting an influence on politics and policy.

India’s growing middle class, the right government support and a favourable external environment have given the property sector wings to escape the headwinds buffeting markets elsewhere.

Tokyo has overtaken Shanghai to become Asia’s largest stock exchange, driven by investors keen to get exposure to the region while mitigating risks in China. However, China is an important source of revenue for Japanese firms in crucial industries, which would be hard hit by a deeper downturn in the world’s second-largest economy.

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The emerging sector of multifamily properties is offering many untapped opportunities – especially in China, where catalysts for the institutionalisation of its rental housing market have coalesced in recent years.

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The Fed must make the tough call on when to ease rates. Amid heightened risks of a major policy blunder, the impact of its decision on Asia – where the case for a looser policy is stronger – cannot be ignored.

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The earthquake and plane collision earlier this month are unlikely to deter travellers as Japan continues to welcome record levels of tourists. The tourism rebound has aided the investment appeal of Japanese hotels, but so have loose monetary policy and a large domestic tourism market.

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The 2024 electoral calendar is jam-packed as more than 4 billion people around the world will go to the polls, but one election has world-changing potential. The return of Donald Trump to the White House would be a gift to US adversaries while eviscerating its security commitments and crippling climate change efforts.

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The big worries in Asian real estate from 2023 will persist this year, but sources of resilience and strength will also endure. Trends meriting close attention include Australia’s housing market, Chinese property beyond housing, an Indian real estate boom and retail property strength.

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A growing number of investors in developing economies are carving China out of their portfolios, but they are merely trading one set of risks for another. Fund managers cannot ignore the influence China has over emerging markets, especially in Asia, and alternatives are not as cheap as they used to be.

The prospect of positive spillovers from mainland China’s economy stabilising and the US Federal Reserve’s dovish turn could mean a brighter 2024 for Hong Kong.

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There is reason for optimism after the Federal Reserve’s surprise interest rate decision, but there are also still plenty of reasons for caution. The fact that markets are expecting the smoothest of touchdowns for the US economy next year should be ringing alarm bells.

Despite concerns about China’s economy and markets, some prominent strategists and fund managers are optimistic about the prospects for Chinese stocks. There is a sense that the economy has stabilised amid the property sector’s struggles, Chinese shares are affordable and parts of the market have proven resilient.

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It is no exaggeration to say that the fate of the global economy, sentiment in financial markets, the future of liberal democracy and the scope for further geopolitical tensions and shocks will be almost entirely determined by events in the US next year.

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China’s property crisis is just one of many signs that Asia’s housing sector troubles are far from over. Japan could be in for a shock if a shift from years of ultra-loose monetary policy pushes up lending rates, hitting home loans hard.

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The main issue concerning investors is whether central banks are done raising interest rates and, if so, how large any cuts that happen will be. The spotlight shifting from China could offer policymakers more breathing room to act but also risks lulling investors into a false sense of security.

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Persistently high rents, rising levels of outbound travel and an inability to respond to changing consumer tastes are holding back Hong Kong’s retailers. The city’s retail industry must be revitalised and better tap into Hong Kong’s unique strengths to make any recovery meaningful and durable.

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Much like those who expected a roaring economic recovery in China this year, bears forecasting doom and gloom risk making a costly mistake. Stronger-than-expected data increases the scope for a meaningful rally, and investors would do well to show some humility in their predictions.

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Expectations that leading Western central banks will cut interest rates next year have reached fever pitch, but these hopes are likely to be in vain. Investors banking on rate cuts must keep an eye on core inflation, central banks choosing pauses versus cuts and further shocks to the global economy.