April 22nd, 2022 | 12:59 CEST
Exploding interest rates: Nordex, Hong Lai Huat, Deutsche Bank, Commerzbank - How to escape inflation?
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Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Rising interest rates - What does this mean for Germany's major banks?
German Bunds are currently experiencing an unparalleled sell-off. In just 6 weeks, the average yield on 10-year bonds exploded from minus 0.08% to a full plus 0.92%. That is a difference of 100 basis points. In parallel, the reference rate for the construction industry, the 10-year mortgage rate, rose by a good 130 basis points from 1.10 to 2.45%. Those who did not get their real estate financing sorted in good time are now faced with considerably higher financing costs, which, in addition to the enormously rising construction costs, are driving many homebuyers to despair. The real estate market, which has been booming for years, is likely to consolidate in the foreseeable future.
However, this scenario is cause for celebration for the major German banks. On the one hand, the expected adjustments to the ECB's key interest rate in the summer will ease the negative interest rate situation. On the other hand, the previously severely squeezed interest margin in the lending business will be revived. That is a double relief for the balance sheet of the credit institutions. The original lending business is finally back. It should also slowly put an end to the long dry spell in the financial sector. Banks were the underperformers of the last decade and are now worth buying again.
Deutsche Bank is making progress in its realignment. In 2022, the integration work around Postbank is to be completed; on the IT side alone, this step will save more than EUR 300 million per year. In addition, there will be further branch closures, as the offering on-site will be strengthened in favor of a broader digital offering. The DBK share is technically only really getting some air above EUR 12.20. After all, there is a payout of almost 2% in May. Commerzbank is not aiming to pay a dividend for fiscal year 2022 until it achieves a consolidated profit of more than EUR 1 billion. Another prerequisite is a Common Equity Tier 1 ratio that is at least 200 basis points above the regulatory requirement even after the payment of a dividend. From a chart perspective, the CBK share now only needs to overcome the EUR 7.5 mark. Both financial stocks are attractive at the current level.
Hong Lai Huat - Cambodia is on the right track
Cambodia is one of the exceptional countries on the Asian continent. It was quiet around the country for a long time, with about 16.5 million inhabitants. Economically, it has also been a tiny country, with a gross domestic product (GDP) of approximately USD 26 billion, which translates into a value added per capita of USD 1,620 per year. By comparison, Germany, the world's No. 4 in the GDP ranking, has an output of about USD 3.8 trillion and a gross value added per inhabitant of USD 45,700 per year. Cambodia is one of the fastest-growing economies globally because of its relative size, but it also remains one of the poorest countries in Asia. With the first major industrial settlements around the capital Phnom Penh, the real estate market is now slowly gaining momentum. In China, as in Hong Kong, Singapore and Japan, the commercial real estate market has been booming for a decade. Close behind, however, Cambodia is now also growing very noticeably.
Hong Lai Huat Group is a real estate developer from Singapore with an operational focus in Cambodia. Due to good market access, they have built up a perfect pipeline there in recent years and operate with good margins. Apartments and commercial units are developed and sold to locals and foreigners. In its flagship D'Seaview project, the Company recently successfully marketed 737 residential units. The target group remains the aspiring middle class in Cambodia, and the majority of the construction projects are geared to their needs. Currently, the Company is implementing the Agri-Hub, a billion euro project the size of a seventh of Singapore. It is expected to generate strongly rising profits over the next few years.
In early April, a dividend payment of SGD 0.002 per share was made due to the doubling of profits in 2021. Complementing the business model, the Company also plans to carry out resource mining in Agri-Hub in a joint venture. The regulatory application is already underway. Hong Lai Huat shares stand at SGD 0.095 on its home exchange in Singapore and are also quoted in Frankfurt. The setup for the next few years is excellent.
Nordex - Alternative power generation on the rise
Wind turbine construction is no less capital-intensive than the real estate sector. Almost all sectors are currently facing the issue of increasingly expensive financing. It is putting pressure on margins, as the calculations for the past two years had been based on the assumption that interest rates would remain low. Nordex has also suffered recently due to material prices exploding, and customers had to wait a very long time in some cases for turbines to be completed. These circumstances are further exacerbated by the disrupted supply chains and high transport costs.
Nordex is nevertheless able to deliver relatively good order figures for the first quarter. Orders for 229 turbines with a total capacity of 1,165 MW have already been received, which is only just below the previous year's level of 1,247 MW. The efficient and high-margin Delta4000 wind turbines share was 91%, up from 73%. Orders for the Group came from 10 European countries, with the Europe region accounting for 89% of all orders, mainly Germany, Finland and Croatia. Following the invasion of Ukraine by Russian troops, sentiment for alternative power generation has gained considerable momentum.
Nordex is ideally positioned in the alternative market to fossil power generation and should thus be able to grow unduly over the next few years. Financing, high material prices and transport costs remain questionable. However, the stock has gained a full 50% since the beginning of the war and is currently consolidating slightly again. As a climate protection share, it remains in the focus of investors.
Inflation, broken supply chains and rising interest rates could lead the global economy into stagflation, argued Professor Clemens Fuest on Markus Lanz. Finding the right stock market strategy in a political crisis with strong economic dampening effects is, therefore, no easy task. Banks are looking good at the moment, and GreenTech stocks are always in demand. Hong Lai Huat is involved in a unique region with excellent growth prospects and is very successful.
Conflict of interest
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