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On Monday, HSBC analyst Tom Musson revised the stock rating for Shaftesbury Capital PLC (SHC:LN) from "Buy" to "Hold," also reducing the price target to GBP1.17 from the previous GBP1.63. The adjustment follows Shaftesbury Capital’s first-half 2024 results, which showed a return to valuation growth. The company experienced a like-for-like uplift of 1.4%, with a 3.2% growth in estimated rental values (ERVs) surpassing the impact of a 7 basis points outward yield shift. The portfolio gains were noted across most segments, with the exception of Residential, which saw approximately 1.0% growth.
Musson’s commentary highlighted the influence of higher bond yields on the property investment company’s prospects. Despite the positive performance in the first half of 2024, the analyst anticipates a deceleration in the valuation recovery pace due to recent increases in market bond yields. HSBC’s forecast suggests a more modest growth in asset valuations over the next few years.
Looking ahead, HSBC projects a continued increase in Shaftesbury Capital’s asset valuations, but at a tempered rate. The firm expects a 1.2% growth in the second half of 2024, followed by 2.0% in 2025, and 3.4% in 2026. These projections are made under the assumption of approximately 5% annualised growth in ERVs from the second half of 2024 through the fiscal year 2025.
Shaftesbury Capital’s recent performance, characterized by a broad-based growth across its portfolio, reflects the company’s resilience in a challenging economic environment. However, the updated outlook from HSBC suggests that investors may need to adjust their expectations as the market adapts to the changing financial landscape influenced by bond yields.
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