GBP went through a Scottish roller coaster
3 big events in September and they happen on the same day. 1) Scotland independence referendum; 2) listing of Alibaba in New York； 3）Apple iPhone 6 launch.
The Scotland independence referendum was “the” global event and made a big impact to the currency world. The British Pounds with the threat of losing an arm and a leg, dropped like a rock against USD in the first week of September from 1.661 level on 2 September to 1.605 on 10 September. It then rebounded and spiked to 1.653 on 19 September when “No” won the race. EUR was also struggling with weak economic data and cold response from economic simulation plan. EUR continued its weakening against the GBP that started at 1.200 level in April and it was EUR 1.2804 to GBP 1 on 19 September. Considered it was EUR 1.24 to GBP 1 on 10 September, the 3% weakening in EUR in 9 days is a roller coaster. Imagine UK becomes a mini Euro zone. With England taking the leadership role like Germany while Scotland, Wales and Northern Ireland pick their choices of being Italy, Spain and France. England controls the GBP money printing machine. Not a pretty picture. The UK stock market was relatively calm with the whole event with the FTSE 100 index range bounded between 6750 and 6900 level in most of September but it snapped on 23 September with geo-conflict to 6650 level. In Sterling terms, UK FTSE100 Index is down 1.1%, Eurostoxx 50 is down 2.7% and S&P is up 8.6% year to 233 September.
Alibaba is kind of an Amazon plus PayPal in China and it is USD 215 billion market capitalization. It operates the biggest online shopping sites in China. www.taobao.com is like eBay where anyone could open their own online stores but a shop may need to pay a few thousand pounds a month for marketing packages to get eyeballs. There is naturally thousands of anything you can imagine. You type “Rainbow Loom” and there are 8,675 items found. There is www.tmall.com that only allows selected merchants to list their products. So brands like Prada and Louis Vuitton are available in Tmall. Alibaba’s PayPal equivalent is called AliPay which is the biggest online payment gateway in China. Alibaba is same size as Amazon and eBay combined. Amazon is USD 150 billion market capitalization, still in heavy investment stage expect to report losses. Year to date share price performance is down 19% as of 23 September. eBay is USD 65 billion market capitalization, making good money and trading at 18 times estimated profit to earnings ratio. The stock is down 4% year to date as of 23 September.
Apple launched iPhone 6 and its share price has been rallying since April from USD 75 a share to USD 102.64 as of 23 September. Not bad at all considering it is losing market share to Samsung and other Android phones. Basic iPhone 6 16GB are offered at GBP 539 and the bigger iPhone 6 Plus 128 GB at GBP 789. The price tag can pay for a nice holiday. But what’s the point of going on a holiday if you cannot have the latest iPhone 6 to take selfies, checking facebook , Instagram, Pinterest. When iPhone 5 was launched, it marked a peak in Apple share price. Hard to say whether iPhone 6 would bring the same fate as Apple’s pricing strategy on iPhone has been pricing it on a premium to competitors. It was also announced that iPhone 6 sold over 10 million units over the first weekend which is a new record for Apple.
A smaller event in September. GlaxoSmithKline (“GSK”) suffered a massive fine of GBP 300m from the Chinese government for bribery. At least it is done and dusted after a year of investigation accusing the company paying as much as GBP 30m in bribes to doctors in China. With the dark cloud hanging in the past year, GSK share price has been suffering and it has come off from GBp 1700 level in February to as low as GBp 1365 on 8 August. It has been paying more than 5% dividend yield since 2010. It is back to GBp 1400-1450 level as of 23 September. GSK is a blue chip company and the current price is back to 2013 level. Worth taking a look if it is worth bargain hunting.
