Juli 10th, 2016
Giant_Panda_Eating – Wikipedia – by Chen Wu from Shanghai, China
Chinese state funds are currently on a buying spree in Germany
An interesting Reuters report by Frankfurt based Tina Bellon from mid-June states that ‘German insurers are seeing increased competition from Asian buyers as they seek to boost investment in domestic real estate to counter the effect of negative interest rates’
German ‚Bunds‘ have been the traditional investment of German insurers – namely very safe and yes very boring German government bonds. Boring, but where yields have traditionally been constant if not spectacular.
Enter the European Central Bank and it’s money-printing programme of ‚quantitative-easing‘ or ‚monetary easing‘ if you prefer, which has now turned German bonds into negative territory for the first time ever.
German Bund yields turn ’negative‘
The ’10-year-German-bund’ yield closed recently at minus 0.008%. This means that ‘Bund’ buyers will have to pay Germany to hold their money [!] for a decade — 8 euro cents a year for every thousand euro lent. Falling bond yields also usually lead to rising prices.
With Brexit, and the uncertainty it brings, and German 10-year bond yields turning negative, insurers are therefore raising their profile on Germany property with its rising prices.
With rising prices in its major cities, Germany real-estate is regarded as a stable market with high-quality property and therefore is attracting Chinese and other international real-estate investors.
This is especially true in Germany’s large cities and the capital Berlin and we have written before about it on this blog.
The Reuters article by Tina Bellon ended by quoting the outspoken Scottish hedge fund manager Hugh Hendry. He called German residential property ‚an investment that can survive any „vial of poison“ ‚.
An interesting aspect to the finances and economics surrounding the German Bunds a piece from Forbes which claims that Germany actually profited from Greece’s woes last year.