Asia news roundup: May 2024

China real estate support policies

China has announced a series of supportive measures with regards to the removal of homebuying restrictions. Shanghai paved the way for Shenzhen and Guangzhou to be among the tier-1 cities to respond to the latest round of easing. Earlier this month, Hangzhou and Xi'an followed in the footsteps of other major cities such as Chengdu in relaxing the local residential market. With top officials signaling the intention to manage the real estate downturn, numerous policies were enacted, from lowering of downpayment and interest rate for housing provident fund loans to the removal of interest rate floor for commercial mortgage loans. A notable remark was also given as to the possibility of local authorities playing a role in reducing housing inventory. Developers such as Vanke, Kaisa and Country Garden have recently seen progress in their restructuring, with Vanke even managing to raise one of the single largest loan in recent times worth CNY20b from a syndicate of Chinese financial institutions.

The dance between Anglo American and BHP

Deal discussion between Anglo American and suitor BHP has been extended by a week, with BHP having to announce final terms and offer by 29 May 2024. A few hours before the deadline, Anglo American has signaled its non-intention to further engage with BHP by dismissing another deadline extension. Apart from the deal value, which has been rejected by Anglo American three times despite the consecutive upwards revisions, questions were also raised regarding the complicated deal structure involving Anglo American’s South African assets. To get the deal across the line, BHP is now willing to offer nearly US$74b all-share offer to obtain Anglo American’s prized assets such as the Quellaveco, Collahuasi and Los Bronces copper mines. The long-standing hurdle continues to be the separation of the iron ore, platinum and diamond operations. A transaction with multiple phases can take years to execute, with the initial demerger plan proposed by BHP highly contingent on the assessment of South Africa’s regulators.

Japan companies stock split bonanza

With Japan equity markets roaring back to life, investors have been on the prowl for high quality Japanese companies. A weaker yen and stronger corporate governance reform agenda buoyed the share prices of many industry bellwethers. Warren Buffett's investments into the trading houses and activist campaigns to boost shareholder returns propelled companies like Mitsui & Co to new highs. Mitsui & Co, Sumitomo Mitsui Financial Group and Sony Group are three notable companies who announced stock splits this month. These stock splits will bring down the price per share and reduce the capital outlay for smaller shareholders to invest in these companies. Concurrently, many of these companies are also committing to share buybacks in a bid to enhance shareholder returns and improve their price-to-book valuation.

China and South Korea semiconductor industry support

South Korea has announced US$19b in government support for the semiconductor sector. With chips becoming a hot topic of strategic national interest, many countries have realised the importance and risk of over-reliance on the global semiconductor supply chain. South Korean presidential office said that US$12.5b of financial support will run through the Korea Development Bank to promote investments of semiconductor companies. Around the same time, China intends to set up a US$47.5b semiconductor investment fund to advance their domestic chip capabilities, in the face of recent US sanctions. The funding will help China with their target of self-sufficiency in the semiconductor chain, accelerating development of the ecosystem built upon Huawei’s success.

Lendlease to exit some international businesses

Lendlease is scaling back its international footprints by embarking on a A$4.5b capital recycling exercise, for which A$2.8b is targeted to be completed in the next twelve months. This is part of a broader corporate overhaul to exit less profitable projects and refocus on their home market in Australia. The sale of the construction businesses in US and UK are in the works and several assets from Europe to China are also slated for divestments. As a result, staff headcount at Lendlease will be further reduced and the company targets A$125m in annual savings within twelve months from these efforts. Lendlease's chairman Michael Ullmer will also step down from the company's board at the shareholder meeting later this year.