PRESS DIGEST - Financial Times - Feb 7

The Financial Times

COMMERCIAL PROPERTY SLUMP SPURS INVESTORS TO PULL 1.6 BILLION POUNDS FROM FUNDS

According to the Association of Real Estate Funds, outflows from commercial property funds increased by 76 percent from the third quarter. More than 1.6 billion pounds were withdrawn in the last quarter as investors reacted to the downturn in property prices. AREF chief executive Rachel McIsaac said retail investors led the redemptions. The high volume of redemptions in the last quarter is in contrast to inflows of 2.5 billion pounds in the first two quarters. McIsaac said: "A lot of people were persuaded to the buy into property funds this time last year." AREF, however, said the severity of the downturn could result in prices bottoming out, to the benefit of property funds.

DARLING VOWS TO AID MORTGAGE MARKETS

Speaking at the annual dinner of the manufacturing body EEF on Wednesday, Chancellor of the Exchequer Alistair Darling said the housing market is not in as dire a state as the early 1990s. His comments came as the Treasury looks into possible options to aid the revival of the wholesale mortgage markets. While the Council for Mortgage Lenders is lobbying for a U.S.-style interventionist approach where a government agency lends money to banks in exchange for mortgage-based collateral, the Treasury currently supports a clearly structured wholesale mortgage financing market, in conjunction with a German-style private sector approach. Last month, the chief UK economist of Morgan Stanley, David Miles, called on the government to look into lending directly to banks in order to deal with the potential of a severe squeeze in the mortgage market.

RETAILERS HIT BY FALL IN CONSUMER CONFIDENCE

A survey conducted by Nationwide revealed consumer confidence to have fallen in January to its lowest point since May 2004. The survey coincided with the Spring Fair, the annual trade show held at the National Exhibition Centre in Birmingham, where some delegates representing the retail industry confirmed the results of the survey. The organiser of the event, Emap EMA.L, attempted to put on a brave face. Its managing director for Trade Promotions Services, Alison Jackson, said: "We are not as pessimistic as you might expect. We have had record rebookings for next year."

INVESTORS BACK TEAM FROM ROCK

In a blow to the Virgin-led consortium, SRM Global and RAB Capital have thrown their considerable weight behind a rescue bid mounted by the management of Northern Rock NRK.L, led by non-executive Paul Thompson. The two hedge funds had previously backed the now abandoned Olivant-led approach. In their opposition to the Virgin bid they are joined by Legal & General and Schroders. The Virgin bid would need the support of shareholders who include those who dislike the fact that its bid would significantly dilute their holdings through the injection of 1.25 billion pounds of new equity and the shrinking of the mortgage book. Thompson's plan will lead to the halving of the bank's 110 billion pound balance sheet within three years.