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Seven Days: 10 February 2017

A round-up of some of the biggest stories of the week
February 9, 2017

Aldi's march

Land grab

Discount supermarkets are increasingly the scourge of their larger rivals – and German retailer Aldi has hit a new milestone. It now boasts a 6.2 per cent share of the UK grocery market, just ahead of Co-op on 6 per cent, and has entered the top five names for the first time. Kantar Worldpanel data shows that only a decade ago Aldi was the 10th-largest food retailer, with less than 2 per cent market share. The announcement came on the day Co-op chief executive Richard Pennycook stepped down suddenly. Steve Murrells, head of its food business, will take the reins.

Call connected

Three’s redial

Three UK has finally revealed its hand after its £10.25bn attempt to buy rival O2 was blocked by regulators. Three has said it will now pay £250m for UK ­Broadband, which operates as mobile broadband service Relish. UK ­Broadband is part of PCCW, which is owned by Richard Li, the son of Li Ka-shing, whose CK Hutchison group owns Three. The main benefit of the deal is access to UK Broadband’s high-frequency spectrum, which will be useful for the 5G launch.

 

 

Robust demand

Bellway’s build

Newcastle-based housebuilder Bellway completed 4,437 homes in the six months to end-January, a 6.5 per cent rise on the same period last year. Its forward order book is up by 9 per cent to £1.1bn too, thanks to what chief executive Ted Ayres called “robust” ­customer demand and the fact that purchasing a new home remained affordable thanks to the “competitive mortgage environment” and government support schemes such as Help to Buy, which enables a property purchase with a 5 per cent deposit.

Graduating debt

Student loan sales

Mooted sales of the country’s ­student loan book look set to ­generate £12bn for the ­exchequer in the coming years. An initial deal should see the sale of £4bn of loans that first entered repayment between 2002 and 2006. The sale price could be lower, however, due to the quality of the loans, half of which are expected to be unrated. A series of similar deals linked to the £44.5bn student loan book should help the government hit the £12bn figure. The sales will be done through ­securitisation, with the loans packaged up and sold on to investors as bonds.

Solid trading

Hargreaves hits record

The supposed rattling of investor confidence due to heightened political uncertainty doesn’t seem to have hit brokering giant Hargreaves Lansdown. The Bristol-based group appeared unscathed after reporting record assets under administration of £70bn at the end of December – up 13 per cent since the end of June last year. Reported net revenue of £184.8m for the period was up 16 per cent from the ­previous half-year. The business also announced a 10 per cent increase in its interim dividend.

Europe bull

Continent upgraded

BlackRock’s global chief investment strategist, Richard Turnill, has upgraded European equities from neutral to overweight on the basis that investors are too pessimistic on the asset class. Mr Turnill expects continental stocks to benefit from the global reflationary environment and suggested profit upgrades this year had put an end to the downgrade cycle of recent years. Projected earnings growth is now mostly coming from cyclical sectors that benefit from improving global growth and a weak euro. Mr Turnill added that recent upside surprises in European growth and ­inflation confirm the positive GDP signals and that political risk was being overstated.

Regulator spat

Rules dispute

The UK’s Financial Conduct Authority (FCA) has spoken out against proposals by the Basel-based Financial Stability Board to better regulate open-ended funds. Watchdogs have been considering how to oversee open-ended funds that invest in illiquid assets after several property funds were forced to temporarily halt redemptions in the wake of the EU referendum. Some regulators want powers to force funds to stop redemptions in exceptional circumstances, but the FCA warned that such a move could cause the very run the intervention was intended to prevent.

 

Consumer debt is a growing issue in the UK, but it is a problem globally. The chart shows the level of total credit to the non-financial private sector as a percentage of GDP. Analysis by M&G Investments shows Chinese and Australian debt ratios are nearing the peak ratio seen in Japan in the 1990s (221 per cent) and Spain in 2010 (218 per cent).

Anthony Doyle, an investment director within the M&G fixed interest team, said that “many have taken their eye off the high and rising debt ratios in some of the world’s largest economies”.

“Developed economies are still characterised by rock-bottom central bank rates... one has to wonder whether the next global recession will be much longer than the experience of 2008-09,” he said.