Is Saudi Arabia the new China?

That possibility is farfetched but not as farfetched as it was just last year considering current Foxconn negotiations.

You probably know that name as being Apple’s (AAPL) largest iPhone assembler – and a company with an extremely significant presence in China… which is becoming more and more of a liability.

Let’s start with how the Chinese government has been cracking down on a range of sectors – especially tech – for well over a year now. That means companies within them have to toe the party line or suffer the consequences.

The ongoing Evergreen Group’s woes also show there’s something structurally disconcerting about China’s economy. That enormous real estate conglomerate is so riddled with debt, nobody quite knows what to do with it. And it’s not alone in its financial suffering over there.

This is very problematic considering what a gigantic chunk of the Chinese economy real estate makes for.

Everything above has led to increased international concern about investing in the country. So has continuing Covid-19 measures, with Fox Business writing that China has locked down:

… two major cities, freezing production across a number of auto manufacturers and electronics factories – a move that threatens to further exacerbate the hottest inflation in four decades.

Beijing imposed a seven-day lockdown of Shenzhen, a key port city sometimes referred to as the ‘Silicon Valley of China’…

Where Foxconn is situated.

With no signs that China will back down on its zero-Covid policy anytime soon, it only makes sense that Foxconn is looking to invest elsewhere. And, clearly, Saudi Arabia is willing to give it space.

Specifically, the deal being discussed is to jointly build a $9 billion factory to make electronic parts and pieces. And Foxconn is also in discussions with UAE to host the same project.

More Non-REIT News to Know About

Speaking of China before we get back to tech news, Bloomberg ran this headline yesterday afternoon: “Panic Selling Grips Chinese Stocks in Biggest Plunge Since 2008.” It reads:

Chinese stocks listed in Hong Kong had their worst day since the global financial crisis, as concerns over Beijing’s close relationship with Russia and renewed regulatory risks sparked panic selling.

The Hang Seng China Enterprises Index closed down 7.2% on Monday, the biggest drop since November 2008. The Hang Sang Tech Index tumbled 11% in its worst decline since the gauge was lunched in July 2020, wiping out $2.1 trillion in value since a year-earlier peak.

Elsewhere in the world, markets were largely down as well – just not by as much. London’s FTSE tumbled 1.5%, while France’s CAC and Germany’s DAX lost 1.4% each.

Helping to drive the U.K. selloff was the Office for National Statistics’ admission that the country’s real regular pay fell 1% last quarter – its biggest drubbing since 2014. The Bank of England’s decision to increase interest rates this week doesn’t help in the short-term outlook either.

And as for the U.S., markets were “mixed” yesterday, with the:

• S&P 500 falling 31.20 points, or 0.74%
• Dow rising 1.05 points, or 0.00%
• Nasdaq dropping, or 262.59 points, or 2.04%.

Oil fell as well – significantly so – to $102.14. That was a $7.19 tanking, or 6.58%, thanks to China’s shutdown-fueled reduced energy usage. And gold lost $29.10, or $1.47%.

The World According to REITs

Housing prices are still going up, and so is rent, as Yahoo Finance’s Morning Brief reminds us:

Rent growth, not just soaring energy prices, is doing its part to push inflation to a 40-year high and there’s little sign of it letting up. Rent inflation rose at a seasonally adjusted annual rate of 4.2% (highest since 2007) and an increase of 0.6% month-on-month (highest level since 1987), according to the Bureau of Labor Statistics’ Consumer Price Index (CPI).

Much of that, it adds, is due to continuing interest in four cities: Miami, Florida; Dallas, Texas; Denver, Colorado; and Phoenix, Arizona. Remember that as we keep following real estate investment trusts (REITs) this year.

As for this very moment, here’s what we know about such holdings:

• Pennsylvania Real Estate Investment Trust (PEI) reported Q4 funds from operations (FFO) of $0.17 per share. Same-store net operating income (minus lease termination revenue) rose 52.% year-over-year. And, for 2021, it rose 26.4%. Occupancy improved 330 basis points year-over-year for the quarter, and its total core mall leased space was 94.3% while total core mall occupancy was 93.2%.
• BRT Apartments (BRT) announced Q4 FFO of $0.35 and same-store NOI of $12.97 million, a 12.3% increase. For the full year, that latter calculation was $44.18 million, an 8.2% gain over 2020. The REIT added that its “entire portfolio increased same-store occupancy by 160 basis points to 95.3% and grew average monthly rent and related revenues by 2.7%.”
• CorEnergy Infrastructure (CORR) saw Q4 results, including consolidated revenue of $35.8 million. Average transported crude oil volumes fell by 3.7%, though that was mitigated by the full weight of Q3 tariff increases. As management wrote, the company is now past its “pandemic-related challenges” and is “positioned for the future.”

Investors weren’t impressed with CORR’s news, however, as evidenced by yesterday’s market action.

(Click on image to enlarge)

(Source: The Daily REITBeat)