—— Apple PC Shipments Plunge 40.5%; $1.5 Trillion in CRE Debt Faces Crisis; Major Chinese Banks Cut Deposit Rates; 70% of Parents Drain Savings to Support Kids; FedEx to Save $4B by Merging Delivery Networks; Blackstone Offloads Two Irvine Office Towers; S&P Shorts Hit Decade High
1. Apple PC Shipments Plunge 40.5%
According to the latest industry report by IDC, global PC shipments by computer makers plummeted 29% in Q1 this year to 56.9 million units, falling below early 2019 levels, as pandemic-era demand driven by remote work dissipated.
Among leading global PC brands, Lenovo and Dell each saw shipments drop more than 30%, while HP’s PC shipments fell by 24.2%.
Most strikingly, Apple’s PC shipments plunged 40.5%.
IDC research manager Jitesh Ubrani stated that although inventory clearance had clearly slowed in recent months, levels still far exceeded the healthy range of 4 to 6 weeks. Even with promotions, inventory overhang is likely to persist at least through Q3.
IDC forecasts that PC sales may recover in 2024 as the global economy rebounds and PC hardware sees upgrades.
Remote work drove PC sales during the pandemic, but that demand has now vanished.
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2. $1.5 Trillion in Commercial Real Estate Debt Faces Crisis
Morgan Stanley analyst James Egan wrote last week that $1.5 trillion in commercial real estate (CRE) loans will mature by the end of 2025, but the bigger issue is: who would be willing to refinance them in today’s environment?
Morgan Stanley estimates that office and retail property valuations may have dropped by up to 40% from their peaks, heightening default risks.
What’s worse, many recently failed small and regional banks were the largest CRE lenders last year. The report shows that nearly 70% of CRE loans maturing in the next five years are held by banks, adding systemic risk to the broader banking sector.
Bloomberg analyst Tolu Alamutu noted that many property companies are now trying to reduce leverage and cut investment. Asset sales are also key, but offloading large portfolios is no easy task.
In recent years, small regional banks have accounted for a growing share of CRE lending.
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3. Major Chinese Banks Cut Deposit Rates
Last week, several smaller Chinese banks cut deposit rates for the first time, mainly due to lawmakers’ rate cuts compressing banks’ profit margins.
Banks in provinces such as Henan and Hubei cut rates by up to 45 basis points, lowering annual savings yields from 2.25% to 1.9%.
The Chinese government has recently been trying to revive and grow the world’s second-largest economy, while banks face pressure from shrinking margins.
Last month, the People’s Bank of China (PBOC) announced a cut to the required deposit reserve ratio, allowing banks to issue more loans.
According to Jefferies, Chinese banks’ pre-provision operating profits dropped by 13% in Q4 2022—the steepest decline since 2010—and net interest margins may continue to fall this year.
China’s economy has steadily recovered since reopening, but analysts remain cautious on the banking sector.
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4. 70% of Parents Drain Savings to Support Adult Children
According to a new Bankrate report, 70% of parents with children over age 18 have sacrificed their own wealth and quality of life to support them.
Over half of parents tapped into emergency savings or deferred loan repayments to help their children. 43% said their retirement funds are being depleted.
Data shows that parents of Gen X children aged 43 to 58 are more willing to provide financial help, with 36% reporting significant sacrifices.
A senior Bankrate analyst noted that Gen Xers face high student debt and surging living costs, and parents overextending themselves could endanger their own financial health.
Gen X parents aged 43 to 58 are more likely to sacrifice their own wealth to support their adult children.
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5. FedEx to Save $4 Billion by Merging Delivery Networks
FedEx CEO Raj Subramaniam stated that he plans to save $4 billion in costs by merging the company’s two major delivery networks.
For decades, FedEx Express and FedEx Ground operated independently. In 1998, FedEx acquired the ground business, which relied on third-party contractors for last-mile deliveries.
Last Wednesday, FedEx announced that beginning June 2024, it will transform into a unified air-and-ground delivery company.
Raj said FedEx is at a critical inflection point, and the transition will unlock greater value for shareholders.
FedEx rival UPS boasts a 13% operating margin—far higher than FedEx’s 5.2%—mainly due to a more efficient integrated delivery model.
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6. 黑石倾销两座尔湾办公楼
Recently, Blackstone Group sold two 13-story office towers in Irvine, Southern California, at a steep discount.
A joint venture between Barker Pacific Group (BPG) and Kingsbarn Realty Capital purchased the properties for $82 million—36% below Blackstone’s 2014 purchase price of $129 million.
A nearby office tower was also sold at a 55% discount by LaSalle not long ago.
The two towers are located near the famed 405 Freeway and John Wayne Airport, featuring a fitness center and a six-level parking structure.
According to a Newmark report, Orange County’s office vacancy rate has climbed to an 11-year high of 17.7% due to weakening tenant demand and market uncertainty. For Class A buildings, vacancy is as high as 22.8%.
With remote work and downsized office footprints, office properties may struggle to return to pre-pandemic levels.
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7. S&P Shorts Hit Decade High
According to U.S. Commodity Futures Trading Commission (CFTC) data, large speculative traders, including hedge funds, have increased short positions on the S&P 500, betting that weak economic and earnings data will prolong the recession.
As of last Tuesday, short contracts on the S&P 500 hit 321,000—marking the highest level since November 2011.
Recently, tech stocks have rebounded sharply, attracting more inflows. But after enjoying the rally, hedge funds shifted to short strategies.
Weakening manufacturing and services data increasingly point to a recession, and the market rally that began in early 2023 is now faltering. This Wednesday’s upcoming CPI release could mark the start of one of the worst earnings seasons in history.
CFTC data shows bearish positions now make up the largest share of the market since 2011.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.