By Siddharth Shankar, CEO, Trails Trading
New figures released by the Department for International Trade show UK exports to Asian countries such as India and China growing significantly in the year to March 2018 (up by 31.8% and 15.3% respectively). Notwithstanding the stutter in growth triggered by the US-China trade war, Asian countries are boasting rapid economic and population growth. So, what new opportunities are there for UK businesses in Asia and how can these be exploited?
The UK government has been working hard to pave the way – strengthening trade ties and putting greater incentives in place. Over the period July-October 2018 ministers from the Department of International Trade will visit South Korea, Vietnam, Japan and China. This comes after a succession of visits in the first half of the year. In April, for example, UK Trade Minister Dr Liam Fox touched down in Bangkok on a mission to strengthen links with South East Asia’s second largest economy. It’s the first time in fifteen years such a visit has been made. Simultaneously, the UKEF announced it would double finance available for British businesses exporting to Thailand to £4.5 billion.
It’s easy to see why this has become a priority for the government. Within Asia’s booming population, increasing salaries mean there is a rising middle class – the fastest growing in the world.The highest number of billionaires and millionaires on any continent are also located in Asia. As a result,Asia’s population has an increasingly disposable income and the demand for products and brands is at an all-time high. Health-care spending alone is expected to exceed $3.5 trillion by 2020.Collectively, Asia now represents 60% of the total buying power of the world.
The good news for UK businesses is that the specific demand for high-quality British-made goods – from whiskey to chocolate – is particularly strong.Indeed, research from Barclays Corporate Banking[i] found that 64% of consumers in India, 57% in China, and 48% in the UAE were prepared to pay more for goods made in the UK, because they perceive the quality as higher.
Exporting to Asia is also becoming more straightforward – making it a more appealing proposition for UK businesses. The fast-improving infrastructure in many Asian countries, coupled with the cheap warehousing and logistical costs mean that it’s becoming more feasible to trade there. The lower cost of labour in Asia also allows western businesses to operate in these markets at a reduced cost – minimising the risk normally associated with entering a new export market. Adoption of IFRS and Corporate governance codes by many countries across Asia is also making the process easier.
There are big differences between the different regions in Asia though, so it’s worth taking a close look at the potential of specific nations and areas for individual businesses and sectors. Essentially, Asia is made up of fifty countries, categorised as five major markets – namely China, the Indian Subcontinent, ASEAN countries, the Middle-east(GCC) and East Asia.
- China has immense potential for British businesses. The UK already has a good image there for trade and education relationships.
- India has a population almost equal to that of China but a GDP growth rate of over 7.5% – which is almost double that of China.
- East Asia is a large and wealthy society with high consumption rates. Japan is the world’s third largest economy and already considers the UK an ally, based on long-standing cultural and economic ties. Korea has one of the world’s fastest growing economies – larger than Russia’s, with a third of the population.
- The ASEAN Region– the Association of South-East Asian Nations, including Singapore, Malaysia, Thailand, Vietnam and Indonesia – has a combined population of 640 million people and an economy worth over $2.8 trillion, with increasingly open internal trade. Of the ten members of ASEAN, four are former British colonies and three of those are members of the Commonwealth. Its aggregate economy is forecast to grow this year and next by five percent. The ASEAN region is fast changing from a low-cost manufacturing destination to a pillar of strength of Asian GDP. This area also is a major trade route for global business. The process of regional cooperation and integration is already evident there.
It’s also worth noting that more than half (54%) of CEOs in Asia Pacific are planning new strategic alliances or joint ventures to drive growth and profitability this year, according to PwC’s latest annual CEO Survey[ii]. A further 42% are seeking new mergers or acquisitions.This presents significant opportunities for UK businesses looking to expand overseas.Africa-Asia partnerships also offer new economic opportunities.
There are opportunities within a wide variety of sectors in Asia – from healthcare products to food to tech. Governments are also aiming to shift 60% of Asia’s population to urban areas by 2025. This creates demand in urban infrastructure – with a continued need for both trade and investment. The governments have also signalled that foreign investment will have a significant role to play in this process.
In all, Asia is a market that gives UK businesses access to a population of 4.6 billion people – 75% of the world’s population. And, with Brexit fast approaching, this is an ideal time for more UK businesses to begin exploiting these opportunities.
Energy stocks drag down FTSE 100, IG Group slides
By Shivani Kumaresan
(Reuters) – London’s FTSE 100 slipped on Thursday, weighed down by falls in energy stocks as oil prices slid after a surprise increase in U.S. crude inventories, while IG Group tumbled on plans to buy U.S. trading platform tastytrade for $1 billion.
The blue-chip FTSE 100 index lost 0.4%, while the domestically focussed mid-cap FTSE 250 index also slid 0.4%.
Energy majors BP and Royal Dutch Shell fell 3.2% and 2.5%, respectively, and were the biggest drags on the FTSE-100 index. [O/R]
“What is holding back the UK is a lack of tech stocks to capture the ‘rotation’ back into tech seen since Netflix results,” said Chris Beauchamp, chief market analyst at IG.
“Stock markets overall are much quieter today, looking so far in vain for a new catalyst for further upside.”
The FTSE 100 shed 14.3% in value last year, its worst performance since a 31% plunge in 2008 and underperforming its European peers by a wide margin, as pandemic-driven lockdowns battered the economy and led to mass layoffs.
British Prime Minister Boris Johnson said it was too early to say when the national coronavirus lockdown in England would end, as daily deaths from COVID-19 reach new highs and hospitals become increasingly stretched.
IG Group tumbled 8.5% after announcing plans to buy tastytrade, venturing into North America after a stellar year for the new breed of retail investment brokerages.
Ibstock jumped 7.3% to the top of the FTSE 250 after the company said fourth-quarter activity benefited from better-than-expected demand for new houses and repairs.
Pets at Home Group Plc rose 2.2% after reporting an 18% jump in third-quarter revenue, boosted by higher demand for its accessories and veterinary services as more people adopted pets during lockdowns.
(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V and Mark Potter)
Wall Street bounce, upbeat earnings lift European stocks
By Amal S and Sruthi Shankar
(Reuters) – European stocks rose on Wednesday after Dutch chip equipment maker ASML and Swiss luxury group Richemont gave encouraging earnings updates, while investors hoped for a large U.S. stimulus plan as Joe Biden was sworn in as president.
The pan-European STOXX 600 index closed 0.7% higher, getting an extra boost as Wall Street marked record highs.
All eyes were on Biden’s inauguration as the 46th U.S. President, with traders betting on a bigger pandemic relief plan and higher infrastructure spending under the new administration to boost the pandemic-stricken economy.
Tech stocks rallied to a two-decade peak in Europe after ASML Holding NV rose 3.0% to all-time highs on better-than-expected quarterly sales and a strong order intake for 2021.
Meanwhile, Richemont rose 2.8%, after posting a 5% increase in quarterly sales as Chinese splashed out on Cartier, its flagship jewellery brand.
Britain’s Burberry jumped 3.9% after it stuck to its full-year goals, saying higher full-price sales would boost annual margins, while Asian demand remained strong.
The pair boosted European luxury goods makers that are heavily reliant on China, with LVMH and Kering gaining between 1% and 3%.
“Any sign that retail spending is picking up in China is going to be a boost to the Western markets and those heavily exposed to it,” said Connor Campbell, financial analyst at SpreadEx.
The European Central Bank is set to meet on Thursday. While no policy changes are expected, the bank could face more questions about an increasingly challenging outlook only a month after it unleashed fresh stimulus to bolster the euro zone economy.
“With the new round of easing measures fully in place and no new forecasts to be presented tomorrow, it should be a fairly uneventful day for the euro,” ING analysts said in a note.
Italy’s FTSE MIB gained 0.9% and lenders rose 1.6% after Prime Minister Giuseppe Conte won a confidence vote in the upper house Senate and averted a government collapse.
Conte narrowly secured the vote on Tuesday, allowing him to remain in office after a junior partner quit his coalition last week in the midst of the COVID-19 pandemic.
Daimler AG jumped 4.2% after its Mercedes-Benz brand unveiled a new electric compact SUV, the EQA, as part of plans to take on rival Tesla Inc.
Germany’s Hugo Boss added 4.4% after Mike Ashley-led Frasers said it boosted its stake in the company.
(Reporting by Sruthi Shankar and Amal S in Bengaluru; Editing by Shailesh Kuber and Arun Koyyur and Kirsten Donovan)
Miners lead FTSE 100 higher on earnings cheer
By Shivani Kumaresan
(Reuters) – UK’s FTSE 100 rose on Wednesday as miners gained after a strong production forecast from BHP Group, while encouraging updates from luxury brand Burberry and education group Pearson drove optimism about the earnings season.
BHP Group Ltd climbed 2.8% after it forecast record iron ore production for fiscal 2021, helped by high prices for the commodity. Other miners Rio Tinto, Anglo American and Glencore rose more than 2%.
Global markets rallied in anticipation of more fiscal spending as Joe Biden prepared to take charge as the 46th U.S. president.
“There is a view in the markets that more spending is in the pipeline, after all, Mr Biden will want to start his presidency on a positive note,” said David Madden, market analyst at CMC Markets UK.
The FTSE 100 index rose 0.4% and the domestically focussed FTSE 250 index added 1.4%.
The FTSE 100 has recorded consistent monthly gains since November after the sealing of a Brexit trade deal and hopes of a vaccine-led economic recovery, but has recently lost steam as tighter business restrictions sparked fears of a slow rebound.
Burberry rose 3.9% as it stuck to its full-year goals and said higher full-price sales would boost annual margins and Asian demand remained strong.
Global education group Pearson jumped 8.6% after its global online sales grew 18% in 2020, helped by strong enrolments in virtual schools.
WH Smith Plc surged 10.4% to the top of the FTSE 250 index as its trading during Christmas was ahead of its expectations.
(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V, William Maclean)
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