A messy world with plenty of opportunities.
Watching the news, it is hard to be
optimistic. Brexit has happened before
Grexit. Donald Trump could become the
next US President. Racial tension in
US. Terrorist attack in Nice and shooting
in Munich. It has been a month since the
Brexit referendum and many people feel the world is in a bit of a mess. Many sad stories and many uncertainties. The British Sterling jumped off the cliff
after Brexit vote and against the EUR, it was at 1.3055 before, went to as low
as 1.1646 on 7 July and rebounded to 1.1937 as of 22 July. That was a near 3-year low against Euro. Against the US Dollar, the British Pound went
below 1.30 to a 31-year low. There was a
big side show going on in GBP versus JPY.
It was at 154.77 before referendum and the Pound weakened to JPY 130.18
on 8 July, rebounded to 139.02 as of 22 July.
In short, the entire Britain has become 10% cheaper in the eyes of
American, European and Japanese.
Since Brexit, we have Japanese Softbank buying UK chip-designer
ARM, US AMC Entertainment buying London-based Odeon & UCI Cinemas Group,
China’s Fosun International buying English football club Wolverhampton
Wanderers. The Softbank ARM deal is a
GBP 24.3 billion takeover and it will be Europe’s biggest-ever technology deal
if it goes through. ARM is the largest
London-listed tech company by market capitalization and the Cambridge-based
group is a market leader in chip design for mobile devices. Investors get nervous whenever “biggest-ever”
deal goes through. It could mark the
burst of a bubble. Remember the dotcom
bubble and the telecom merger and acquisition saga around Orange, Mannesmann
and Vodafone back in 2000. In June,
Microsoft announced to acquire LinkedIn for USD 26.2 billion. Also in June, China’s Tencent and its
partners announced paying USD 8.6 billion for the majority stake of Finnish
game maker Supercell. The sellers are
Japan’s SoftBank and Supercell current and former employees. The deal values the “Clash of Clans” developer
at USD 10.2 billion, nearly double from a year ago. According to thinkgaming.com, Clash of Clans
daily revenue is estimated to be USD 453,000 and 24,600 daily installations. It ranked 5th on top grossing
games and 48th on top free games as of 24th July.
Maybe not many people are familiar with smartphone
games “Clash of Clans”, but many grew up with Nintendo Gameboy and Pokemon
Pikachu. Pokemon was first released in
1996. In July 2016, Pikachu entered the smart
phone games arena with a global block buster Pokemon Go. Pokemon Go was released in Australia, North
America, Europe and Japan. It beat Candy
Crush Saga record in US to become one of the most used smart device apps. As of 22 July, Pokemon Go was downloaded by
more than 40 million people worldwide. The
game makes use of location, camera and augmented reality technology. It combines real world with the virtual world
so one could take their children to Hyde Park to catch virtual pocket monster
and battle with other players in Trafalgar Square. On 19th July, Nintendo share
price in Japan was at one stage doubled since the launch of Pokemon Go and it
has come off 10% from its JPY 32,700 5 years high to closed at JPY 28,220 as of
22 July. Its market capitalization is
JPY 4 trillion or GBP 28.8 billion, a bit higher than ARM.
The bargain hunting was across the board. The European stock market has also digested
the Brexit news pretty well. Eurostoxx 50
Index dropped from 3037.67 as of 23 June (Thursday) to a bottom of 2,697.44 as
of 27 June (Monday) and recovered to 2972.23 as of 22 July. The FTSE 100 index was 6,338.1 on 23 June,
dived to 5,982.2 on 27 June and now higher than pre-Brexit level at 6,730.48. Of course, if we take 10% off due to GBP
weakening, it is weaker than pre-Brexit.
UK banking stocks have not recovered.
Taking the same 3 dates as above, RBS pls was 250.50 GBp, 174.30 GBp and
188.92 GBp. Lloyds was 72.15 GBp, 51.15
GBp and 54.49 GBp. Barclays was 186.95GBp,
127.20 GBp and 151.80GBp. Aberdeen Asset
Management share price matched the performance of FTSE 100. It was 312.70 GBp on 23 June, 245.80 GBp on
27 June and 316.00 as of 22 July. Hargreaves
Lansdown was 1389.00 GBp, 1056.00 GBp and 1271.74 GBp. One could see the more UK centric the business,
the more hammered are the share prices. Too early to say the worst is over but for
sure, the smart money is in full action already.
