Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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Archive | November, 2016

Moscow’s rich buy £1m entry into UK

Posted on 30 November 2012 by

The number of wealthy migrants entering the UK on specialist visas designed to attract millionaire investors jumped by over three-quarters last year, led by people from China and Russia seeking to put down roots in London.

Tier 1 visas were introduced in 2008 to allow individuals with at least £1m to invest to remain in the UK on a long-term basis. They are seen as a speedy way for wealthy foreign nationals and their children to become British citizens.

    London appeals to well-heeled foreign nationals because of its global transport connections, stable property market and good private schools. A crackdown on dissent in Russia following the election of Vladimir Putin as president is also thought to be one factor behind the increase in visas being issued to Russians.

    Take-up of the visas has increased sharply since April 2011 when the rules were changed to encourage more applicants. The number of visas issued jumped by 78 per cent to 419 in the 12 months to the end of June 2012 compared with 235 in the same period a year earlier.

    Russian millionaires represented 24 per cent of successful applicants in the year to the end of June, according to information obtained from the UK Border Agency by law firm Pinsent Masons. Chinese foreign nationals accounted for 23 per cent of the total while migrants from the US accounted for 5 per cent.

    Following last year’s rule change, investors can get indefinite leave to remain in the UK more quickly. People investing at least £1m can win the right to stay within five years, while those investing at least £10m or £5m can qualify within two or three years respectively.

    The minimum amount that must be invested to qualify for the investor visa is £1m. Of this, a maximum of £250,000 can be invested in property, while the remainder may be invested in other UK investments such as shares or bonds.

    “This means someone who has bought a £5m property in prime central London could include part of the property’s value towards their investment,” said James Badcock, head of the Geneva office at law firm Collyer Bristow.

    “The UK, and London in particular, remains hugely attractive to wealthy individuals from around the globe,” said Simon Horsfield, head of Pinset Masons’ business immigration team. “Foreign nationals still see London as an expat friendly gateway to Europe.”

    Expatriates are attracted to London’s political stability and transparent legal system, he said. “Investors also see prime property in the capital as a very attractive and liquid asset,” he added.“Prime property prices in London have remained stable or even increased despite the global downturn, which is a real lure for wealthy individuals.”

    Estate agents have recently reported a dramatic rise in the number of wealthy overseas buyers looking to invest in London property.

    Liam Bailey, Knight Frank’s head of residential research said: “The property boom in prime central London is being driven by overseas buyers. More than 60 per cent of all sales above £2m are currently going to overseas purchasers.”

    Linda Penny, partner at accountancy firm Wilkins Kennedy, said many investors satisfied the visa requirements by investing in UK stocks and shares or UK government bonds as well as prime residential property.

    “Investors from the USA or India, in particular, tend to favour these investments,” she said. “However, Chinese investors typically see these investments as too risky. They often prefer to invest in an asset-backed trading business.”

    Yuri Botiuk, partner at Pinsent Masons, added: “Many of the Russians applying for these visas are ‘stability migrants’. They want an EU passport and the UK is seen as the premier safe haven.”

    Another reason for the rise is that the other opportunities for gaining UK visas are becoming more restricted, which makes the investor visa a more popular option. “For wealthy individuals, the criteria for the visas is easy to meet,” said Mr Horsfield. “They’re essentially a fast-track for migrants who have money.”

    Additional reporting by James Pickford

    Spanish banks surge on acquisition talk

    Posted on 30 November 2012 by

    Spanish banks surged this week amid optimism about dealmaking in the sector.

    Banco de Sabadell
    gained on speculation it would buy Banco Mare Nostrum. The shares gained 8.8 per cent to €2.15 over the week.

      “The proposed acquisition . . . highlights opportunities for stronger institutions to acquire assets put up for sale by banks with weaker balance sheets in Spain,” Fitch Ratings wrote in a note about Spanish lenders.

      Caixabank’s agreement with Berkshire Hathaway to shift its life insurance portfolio to Warren Buffett’s investment group sent its shares rallying 6 per cent to €2.94.

      Sanguine investors bought into Banco Popular’s €2.5bn rights issue
      , adding more than a quarter to its market capitalisation. The lender tapped capital markets after an independent audit revealed it needed an extra €3.2bn. Its shares climbed 17 per cent to €0.64.

      Not all analysts were positive. “The shares are pricing a more optimistic outcome,” wrote RBC Capital Markets, which has a €0.35 price target and “underperform” rating on the shares.

      The FTSE Eurofirst 300 gained 0.8 per cent to 1,119.36 over the week.

      ThyssenKrupp
      lost ground after it said a deal with Sogefi
      , the Italian car parts maker, had fallen through. “Expect a ‘messy’ Q4,” Deutsche Bank analysts wrote.

      The German steelmaker’s shares lost 7.3 per cent to €15.57.

      Nokia shares fell 7.4 per cent to €2.55 as it stepped up a patent battle with Research In Motion

      , launching lawsuits in Canada, the US and the UK.

      ‘Final push’ for trail commission

      Posted on 30 November 2012 by

      FSA©Charlie Bibby

      Investors are being warned to look closely at products recommended by financial advisers ahead of this month’s ban on commission.

      Sales of certain investment products that pay large commissions to advisers have increased during the past few months, according to the financial regulator.

        The Financial Services Authority is concerned that some advisers could be attempting to make a last-minute push to secure long-term commission payments ahead of the upcoming ban.

        The retail distribution review (RDR), which takes effect on December 31 2012, is a package of changes intended to clean up the financial advice industry.

        From 2013 advisers must pass qualifications equivalent to the first year of an undergraduate degree in order to work with clients, and must specify whether they offer advice on the whole of the market (and are independent) or are limited to a specific range of products (and so are restricted).

        They will also have to arrange a fee with clients, making it clear exactly how much their advice costs instead of taking a commission from providers. Investors will be able to choose whether they pay the fee upfront or as a charge on their assets.

        “It’s an evolution,” said David Geale, head of investment policy at the Financial Services Authority (FSA). “And it will be a significant change that people will notice when they visit their adviser next year.”

        The regulator believes the new rules will improve the quality of financial advice in the UK and put an end to “commission bias”, which encourages some advisers to recommend products that pay the highest rates of commission rather than those that best suit their clients.

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        The Association of Investment Companies, for example, is hopeful that the ban will spur more advisers to recommend investment trusts, which are currently overlooked in favour of products such as investment bonds that cost savers more but pay out larger commissions.

        Research from consultants BDO also found that more advisers could opt to recommend cash-based products in future, to meet new risk-based regulation.

        RDR has taken more than six years to come into effect, during which the regulator has agreed to a number of compromises requested by advisers.

        One change means that although the ban will prevent advisers from taking commission for sales they make next year, they can still take an annual sum, known as trail commission, from sales made before the end of this year.

         FT Money Show podcast

        Listen to Elaine Moore discuss the Retail Distribution Review on the FT Money Show podcast

        Annual trail commission is typically 0.5 per cent for an investment Isa and more for pensions and investment bonds, and is taken out of a client’s money regardless of whether or not the adviser has done any new work.

        Although advisers cannot take trail commission for products sold after the ban they can continue to take it for sales before then, until the product is closed. They can also continue to take trail commission on investment bonds even if the funds held within these wrappers are closed and new funds are opened.

        According to the FSA there has been a marked increase in the sale of investment bonds in 2012.

        Reporting its third-quarter results, Prudential, the UK insurer, wrote that onshore bond sales rose by 27 per cent in the first nine months of 2012 compared to the same period in 2011 and noted that this may be “Retail Distribution Review (RDR) related”.

        “While our business is on track to be ready for the onset of RDR, we expect investment bond sales, in particular, to be impacted in the latter part of 2012 and into 2013 as distributors adapt to the new regulatory environment,” it wrote.

        The FSA said that it was keeping a close eye on overall sales volumes in the weeks leading up to the ban to make sure that advisers were not significantly increasing their opportunities for commission.

        “Once the RDR rules have come into force, we will take action if we see firms acting in a way that could lead to consumer detriment; for example, recommending retention of higher charging products so they can continue to receive trail commission,” it said.

        Pension savers too optimistic on income

        Posted on 30 November 2012 by

        Many people saving for defined contribution pensions have no idea what their income will be after they retire or ever consider this in light of how long they might live. Those who do are bound to underestimate their life exp­ectancy by a wide margin, a study published on Friday shows.

        The research, by the Institute for Fiscal Studies and funded in part by the Nat­ional Association of Pension Funds, underscores the challenges facing policy makers as the country shifts from defined benefit pensions, where employers provide income in retirement, to the defined contribution system, where employers help staff save to buy an income stream, or annuity, from an insurer.

          In the latter system, retirement income depends on the amount paid in and how well the assets in the scheme perform, rather than on years of service and earnings, as is the case with defined benefit pensions.

          The defined contribution sys­tem is on the rise as defined benefits have bec­ome far less common and more individuals save money in an investment pot to buy an annuity.

          “Defined contribution pensions require people to make complex decisions, both while they are accumulating their pension savings and when they want to start drawing an income,” said Gemma Tetlow, a programme director at the IFS and co-author of the report. “Understanding how people have been coping with … decisions over the last decade is important as policy makers consider and implement further reforms to this market.”

          The study found that a third of those close to retirement age had no idea what their pension would be, but for those saving through a defined contribution scheme the proportion was considerably higher, at 40 per cent. It also found that those aged 50 to 64 with defined contribution savings pots are too optimistic.

          On average, their pension pot would have to grow 77 per cent, or £20,200, to match their expectations.

          Joanne Segars, NAPF’s chief executive, said: “The average saver with a defined contribution pension is being over-optimistic.”

          Shaftesbury basks in London’s limelight

          Posted on 30 November 2012 by

          Shaftesbury, the West End-focused landlord, posted strong results for the 12 months to October on the back of what its chairman described as a “truly memorable year for London”.

          The group, which owns 500 properties – predominantly shops – spanning 13 acres of Carnaby Street, Covent Garden and Soho, bolstered its position as the largest landlord in the central London retail district during the period, buying £44m worth of new stores.

            The West End has been one of the UK’s most buoyant property markets during the downturn, supported by a steady flow of overseas shoppers. The strength of activity in the area has driven up rents to record levels during the past two years.

            John Manser, Shaftesbury’s outgoing chairman, said the hosting of the Olympics and diamond jubilee celebrations meant London was “firmly in the world’s spotlight”.

            “The successful staging of these major events has greatly enhanced London’s reputation and should attract more visitors and businesses, particularly to the West End, in the years ahead,” he added.

            Shaftesbury recorded pre-tax profit of £31.2m for the period, up from £29.2m a year earlier. The net value of the group’s portfolio rose 8.9 per cent to £1.82bn. The company proposed a final dividend of 6.05p, up 5 per cent on 2011.

            The group also invested £15m on improving and redesigning buildings in its portfolio.

            Shares in Shaftesbury rose 1p to 548p.

            Tchenguiz nears motorway services sale

            Posted on 29 November 2012 by

            Robert Tchenguiz, the property tycoon, is close to selling £300m worth of service stations as he continues to dismantle the empire he established before the 2008 financial crisis.

            M3 Capital Partners, a real estate private equity group, has been selected as preferred bidder to buy nine Welcome Break motorway service stations, said people close to the situation.

              The proceeds of the sale will be used to pay back Royal Bank of Scotland, a creditor to Mr Tchenguiz’s company, R20.

              The deal marks the disposal of one of the last portfolios bought by Mr Tchenguiz as part of an aggressive spree to buy property and property-backed businesses that spanned the decade leading up to 2008.

              As well as acquiring billions of pounds worth of real estate – from offices to warehouses, apartments and shops – Mr Tchenguiz made bets on the share prices of some of the UK’s best known consumer-focused companies, including J Sainsbury and Mitchells & Butlers pubs.

              The onset of the financial crisis sharply reduced the value of those investments, leaving R20 nursing huge losses and debts running into hundreds of millions of pounds.

              The Welcome Break deal, to be reported in Property Week on Friday, is the second acquisition in the niche property sector for M3. In October 2010, the US group bought a portfolio of eight motorway service stations from the administrators to Swayfields for £240m.

              Among its existing properties, M3 owns the 35,000 sq ft Cobham Services on the outskirts of London, the largest motorway service station in Europe.

              Mr Tchenguiz bought the portfolio for £270m in 2004 in a sale and leaseback deal undertaken by Welcome Break to raise cash and stabilise its balance sheet.

              RBS provided £241m of debt against the properties, with an interest rate swap liability taking the total indebtedness to £300m. R20’s accounts value the portfolio at £297m.

              According to Property Week, M3 beat competition from Telereal Trillium to buy the properties – the portfolio does not include the contracts to operate the service stations. The deal is expected to close within two months.

              Mr Tchenguiz and his older brother Vincent were until last month the subject of a high-profile investigation into the collapse of Kaupthing, the Icelandic bank from which both men had borrowed money.

              The two-year investigation into the brothers collapsed in October, however, after the Serious Fraud Office, the UK’s white-collar crime agency, ruled that there was “insufficient evidence to justify its continuation”.

              Mr Tchenguiz and representatives of R20 could not be reached for comment. M3 Capital declined to comment on the process.

              Gold miners among biggest gainers

              Posted on 29 November 2012 by

              Gold miners were among the gainers as the London market reached a three-week high.

              Petropavlovsk
              rose 1.4 per cent to 328.1p and Centamin
              added 6.8 per cent to 59.5p with Westhouse analysts putting “buy” recommendations on both stocks.

                “We believe gold share valuations are now compelling,” it said. “Gold mining company managements are beginning to realise that to regain investor interest they must deliver, both in terms of asset management and shareholder returns.”

                Poor delivery of production and cost targets over the past year meant gold equities had significantly underperformed gold over the past year, Westhouse said.

                For Petropavlovsk, it saw the market pricing in a failure to deliver, in spite of the Russia-based group mostly achieving or beating targets in recent years.

                Centamin has been hurt by a court ruling in Egypt last month that found its mining licence invalid.

                Westhouse was encouraged by the company’s robust rebuttal and saw the weakness as an opportunity to buy.

                Highland Gold
                , up 6.8 per cent to 94p, was Westhouse’s top pick in the sector with a 160p target price.

                Separately, Highland repeated 2012 production guidance and declined to comment on speculation that it was interested in buying the Kekura deposit in eastern Russia, which analysts value at around $350m.

                The FTSE 100 advanced 1.2 per cent to 5,870.30, a gain of 67.02 points. The index had risen 4.7 per cent in a fortnight, having gained in all but one of the past nine sessions.

                Rio Tinto
                was up 5.1 per cent to £30.90 after it set a target of $5bn in cost savings by the end of 2014. After cutting production targets on Wednesday, Kenmare Resources
                rose 5.8 per cent to 32.7p.

                It was helped by guidance from Rio, the market leader in titanium mineral sands, that demand would double by 2030. Rio also said it would use a relatively weak market next year to rebuild furnaces, which would reduce supply.



                Pennon
                was up 4.3 per cent to 624.5p after management dismissed concerns that it might have to issue equity. Interim results provided few surprises following a profit warning earlier in the month.

                Invensys
                jumped a further 8.9 per cent to 305p on hopes of a full break-up following Wednesday’s deal to sell its rail division to Siemens for £1.7bn.

                “We suspect it may be only be a matter of time before Invensys is acquired once the sale to Siemens is completed – likely around May 2013,” said RBC. “The disposal of Rail leaves Invensys more focused on automation and eliminates the UK defined benefit pension net deficit, thereby removing two major obstacles for potential acquirer.”

                SDL
                rallied 6.7 per cent to 473p amid vague talk of potential bid interest following a profit warning from the software maker earlier in the week.

                “We believe valuation support is provided by the high levels of M&A activity in a number of SDL’s markets,” said N+1 Singer, SDL’s house broker.

                Contract news lifted National Express
                , up 6.7 per cent to 175.5p, with the bus group saying it had won new deals in North America and Spain.

                Persimmon
                rose 3.2 per cent to 796.5p after HSBC turned positive on the housebuilding sector.

                “We think sales rates, pricing, margins and return on capital will all beat market expectations in 2013,” the broker said.

                Among the fallers, BSkyB
                eased 1 per cent to 771.5p after negative comment from Merrill Lynch and Jefferies. Both brokers worried that growing competitive pressures were forcing Sky to make sacrifices on pricing. Merrill added that the group could try to compete by buying production companies, internet providers or a mobile phone network.

                Wood Group
                slid 4.3 per cent to 780p after the founding family sold a 4.4 per cent stake at 775p apiece. Sir Ian Wood, the group’s outgoing chairman, was not among those selling.

                “Given the family’s apparent lack of interest in the business we would not read anything into this share sale,” said Liberum.

                DIY retailer Kingfisher
                was down 0.6 per cent to 279p after quarterly sales disappointed, though cost control meant earnings matched expectations.

                Packaging maker RPC Group
                lost 8.4 per cent to 390p after interim results showed market conditions remained tough. The euro’s weakness against sterling erased RPC’s earnings growth for the period.

                CPP Group
                , the credit card protection specialist, slumped 21.3 per cent to 15.8p after US peer Affinion said it had decided not to make a takeover offer.

                Commercial property loans in spotlight

                Posted on 29 November 2012 by

                An area of acute concern for the Financial Policy Committee is lenders’ reluctance to admit to the losses they are likely to make on commercial real estate, which accounts for about half of all corporate lending.

                Andrew Haldane, FPC member and the Bank of England’s executive director for financial stability, said on Thursday: “Our recommendation has been with an eye, in particular, to the commercial property market.”

                  Commercial real estate loans are particularly susceptible to losses because of high loan-to-value ratios. A fifth of outstanding debt is on properties worth less than what companies owe the banks. Many loans need to be refinanced and more than a third are already subject to forbearance, leaving banks exposed if credit conditions were to tighten.

                  Andrew Bailey, who is on the FPC and heads bank supervision at the Financial Services Authority, has expressed concerns. He told the FT in October that banks’ methods for assessing risks posed by commercial property loans were “bogus”.

                  Mr Haldane said a portfolio-by-portfolio examination of British banks’ loans held on commercial property overseas had raised additional fears. “Six months ago, we said it was already the case then that there was some degree of underproviding on commercial property loans,” he said. “And having looked at some portfolios outside of the UK, we think that the extent of that provisioning might be greater still.”

                  Mr Bailey said last month that transactions in the sector were so large and so idiosyncratic it was all but impossible to build models to determine whether an individual loan would default and what the losses might be.

                  Banking supervisors have told banks they plan to change the rules for determining how much capital they will have to hold against the sector. Rather than rely on their own models, banks must use “slotting”, in which loans are assigned to categories with specific capital requirements attached. A final version of the categories is expected next year.

                  Direct Line and Aviva plan more job cuts

                  Posted on 29 November 2012 by

                  Two of Britain’s biggest insurance companies have announced plans to cut hundreds more jobs, the latest sign of the consequences of the sector’s efforts to become more efficient.

                  Direct Line, the home and motor insurer that floated on the stock market in October, said 236 positions were at risk on top of the almost 1,000 planned job losses it had already disclosed in recent months.

                    Less than two hours after Direct Line’s announcement, one of its biggest rivals, Aviva – which had previously warned it planned to cut about 800 jobs in the UK – said it was considering letting another 120 employees go.

                    Both companies are seeking to make their operations more efficient in the face of limited growth prospects across the UK general insurance sector.

                    Aviva is targeting £400m worth of cost cuts across its global operations, most of which are “job-related”, while UK-focused Direct Line is aiming to reduce its cost base by £100m.

                    All of the latest cuts at Aviva would come from its property claims management operation in Sheffield, known as Asprea, which the FTSE 100 group planned to integrate with similar centres in Perth and Southend by the end of next year.

                    Union leaders have previously described the insurer’s cuts as “unacceptable”.

                    Caroline Cooper, director of property claims, said Aviva hoped to “create a simpler service for our household and commercial customers with fewer people involved in the handling of their property claim. But we appreciate this is also a difficult time for our employees.”

                    The latest prospective cuts at Direct Line, majority owned by Royal Bank of Scotland, will come from the group’s commercial, risk and compliance operations as well as its so-called chief customer office.

                    The insurer has already set out plans to make savings in marketing, IT and various other back-office functions and close a site in Teesside that employs 500 people.

                    “These proposals are another important step on our journey to deliver on our cost-saving target,” said Paul Geddes, chief executive at Direct Line. “They are essential to ensure we are as efficient and competitive as possible.”

                    Direct Line added it hoped to create “a simpler, more efficient business” that would “lead to the creation of a number of new roles”.

                    Both Aviva and Direct Line said they were seeking to support those employees affected by the cuts and hoped to offer some of them jobs elsewhere in their organisations.

                    VinaCapital to sell Hanoi Metropole stake

                    Posted on 28 November 2012 by

                    A stake in the Hanoi Metropole, Vietnam’s best-known hotel, is being put up for sale by fund manager VinaCapital as it tries to sell premium assets after the collapse of the Communist country’s property market

                    .

                    VinaCapital’s London-traded Vietnam Opportunity fund has appointed Jones Lang LaSalle, the property agents, to market its 50 per cent stake in the 365-room, French colonial-era hotel, said David Dropsey, VinaCapital’s investor relations manager.

                      The fund manager has told investors that its stake in the Metropole was worth $58.7m at book value.

                      Real estate agents said that it would not be easy to sell the stake for a significant premium over that price given the distressed nature of the Vietnamese economy. The other 50 per cent of the hotel is owned by the Hanoi government, which exercises full control over the business.

                      VinaCapital is one of several boutique fund managers that raised billions of dollars from international investors when Vietnam was one of hottest emerging markets, before 2008.

                      As with its main rivals Dragon Capital and Indochina Capital, VinaCapital’s internationally listed funds have tumbled in value as the Vietnamese economy has hit the buffers, weighed down by inflation crises, rising bad debts and the bursting of the property and stock market bubbles.

                      With many Vietnam-focused funds persistently trading at big discounts to their reported net asset values, fund managers are under pressure from shareholders to make disposals.

                      Investors who have looked at the Metropole, where Charlie Chaplin, Somerset Maugham and Graham Greene all stayed, said that it was an attractive trophy asset, but they would think twice about paying a big premium for VinaCapital’s stake because of the extent of the Hanoi government’s control.

                      The Metropole stake is the second-biggest investment held by the Vietnam Opportunity fund, which has a market capitalisation of about $550m.

                      This month VinaLand, another London-listed fund managed by VinaCapital, passed a shareholder continuation vote after vowing to make no new investments and return all surplus cash to investors over the next three years.

                      Some international investors have been looking to pick up distressed property assets at bargain prices.

                      But Marc Townsend, who heads the Vietnam office of property agent CB Richard Ellis, said many foreign investors remained uncomfortable with the complex ownership structures and legal uncertainties in Vietnam.

                      “People come every week to look at these assets, but when they peel back the skin, they don’t get quite the ownership structure or control that you want,” he said. “So a lot of these properties will never be acquired by Singaporean funds or Japanese investment trusts.”