China have suspended the circuit-breaker rule that saw trading on the Chinese stock markets halt after just 30 minutes this morning.
The rule – in which trading is automatically suspended if the markets drop by 7 percent or over – was brought in in order to curb volatility on the markets and increase investor sentiment. However, the ‘circuit-breaker’ has already come into play twice this week, cutting short two days worth of trading – leading to the announcement this afternoon that the rule would be suspended.
European markets have also been down today, with the Dax falling over 3 percent and £47 billion wiped off the FTSE.
Chancellor George Osborne is will say in a speech later today that this year could be the toughest since the financial crisis, as global economic problems make this January the worst financial start to the year in sixteen years.
Trading suspension on the Chinese markets, as well as oil prices hitting 11-year lows after increased tension between Saudi Arabia and Iran, have sent global markets into chaos. The chancellor told BBC Radio 4’s Today programme:
“It is precisely because we live in an uncertain world. It is precisely because we have not abolished boom and bust as a nation, that you need to take these steps, difficult steps and I need to go explaining to the public, that the difficult times aren’t over, we have got to go on making the difficult decisions, precisely so that Britain can continue to enjoy the low unemployment and the rising wages that we see at the moment.”
He continued, saying that far from “mission accomplished” on the economy, “2016 is the year of mission critical”.
Serviced apartments provider thesqua.re has closed a successful investment round of $2 million from London based Fintech company Crowd2Fund and OakNorth Bank.
thesqua.re offer luxury serviced apartments for corporate clients, providing four-star hotel standard accommodation for a fraction of the cost and with all the comforts of a home. Their serviced apartments are a convenient solution for corporations looking to make business travel ‘easier and more enjoyable.’
Launched in 2008 as House of Modern Living, the company has recently undergone a rebrand and now has properties in the main areas of London and other key business cities. Through crowdfunding, thesqua.re has raised enough to support expansion to 500 apartments in central London, with an aim to open offices in New York.
One of thesqua.re’s apartments in Paris
thesqua.re’s founder, Sid Narang, said: “Crowdfunding gave us an opportunity to reach out to investors who were involved in the latest tech and industry trends. We specifically chose to raise on Crowd2Fund due to them understanding our business and the only crowdfunding platform to allow us to raise a loan this way.”
Their online campaign on Crowd2Fund closed with 17 high profile investors, making thesqua.re the first UK serviced apartments provider to secure investment through crowdfunding.
Chris Hancock, Crowd2Fund’s CEO, commented: “Crowd lending is such an exciting and fast-growing industry. We loved working with Sid and the team at thesqua.re – they are an excellent example of the innovative, British businesses we helped fund on the platform and a fantastic way to provide our investors with a good return on their investments.”
thesqua.re has grown profitability at 80 percent CAGR to cross $10 million revenue in 2015, and in December the company received the highly commended lndustry Breakthrough Award by the Association of Serviced Apartments Providers. For more information on thesqua.re, visit www.thesqua.re.
Shares in one-price retailer Poundland (LON:PLND) have dropped over 10 percent this morning, as a decline in high street footfall impacted on the Group’s full year forecast.
Total third quarter sales growth was up by 29.4 percent, however due to losses incurred by the conversion of newly acquired 99p Stores, the company stated that pre-tax profit would be at the lower end of the expected range of between £39.8 and £45.8 million.
In a statement, Chief Executive Jim McCarthy said:
“Total sales in the third quarter increased by 30.1% on a constant currency basis and our Christmas and Halloween ranges were our best ever. However, the trading conditions that we experienced in November continued through the third quarter, with high street customer numbers down year on year and this has impacted sales growth.
“I am very encouraged by the sales uplifts of converted 99p Stores and by the speed and efficiency of the conversion process. I expect the store conversion programme to be substantially complete by the end of April and still expect to generate incremental EBITDA of at least £25 million from the transaction. In addition, we remain on track to open around 70 net new Poundland and Dealz stores in the UK and Ireland in the full year.”
Poundland are currently trading down 11.25 percent at 170.26 pence per share. (1104GMT)
High street retailer Marks and Spencer (LON:MKS) released its Christmas trading update this morning, along with the announcement of veteran Chief Executive Marc Bolland’s departure.
Sales of general merchandise were down by 5.8 percent for the thirteen weeks to 26 December, but the company’s food division had an “excellent quarter” with sales up by 3.7 percent.
Marks and Spencer cited ‘unseasonable conditions’ for its decline in clothing and general merchandise, following the lead of Next who announced similarly disappointing results on Monday. However, online sales grew by 20.9 percent, driven by strong customer traffic.
Marc Bolland, Chief Executive, said: “We continued to prioritise gross margin and held back from the heavy discounting seen across the market in the run up to Christmas. As a result we now expect GM gross margin to be at the top end of the guided range.”
At the same time, Marc Bolland announced plans to retire from the position he has held for the past six years, to be succeeded by Steve Rowe.
Robert Swannell, Marks and Spencer’s Chairman, said in a statement this morning:
“Over the last six years Marc Bolland has led Marks & Spencer through a period of necessary change. Over this time, the company has made significant investment in enhanced infrastructure and capabilities.
“I am delighted that, after the most rigorous succession planning, Marc will be succeeded by Steve Rowe. Steve has a deep knowledge of Marks & Spencer and a proven track record of delivering results in key parts of the business.”
Marks and Spencer are currently trading down 0.64 percent at 435.90 (1026GMT).
Trading was suspended on the Chinese stock market on Thursday just half an hour after opening, as a shock devaluation of the yuan caused the market to tumble.
The People’s Bank of China moved the official midpoint on the yuan to its lowest since March 2011, at 6.5646 per dollar, causing panic in the markets and pushing down regional currencies.
Markets stopped trading 30 minutes after opening, as a new control designed to curb volatility was triggered for the second time this week. The mechanism comes into play when the market falls by 5 percent, which pauses trading for 15 minutes, or 7 percent, which ceases trading for the entire session. The benchmark Shanghai Composite Index fell more than 7 percent to 3125.00.
In reaction to the Chinese markets, the FTSE fell nearly 3 percent at open, before steadying up to trade at 5918.23, down 2.59 percent (1005GMT). All European markets are currently down a similar level, with the DAX falling over 3 percent.
Growth slowed in the British service industry in December, according to the latest survey from financial data firm Markit.
The Markit/CIPS UK services purchasing managers’ index moved down 0.4 points to 55.5 last month, from 55.9 in November. Any figure above 50 indicates growth. Markit also decreased its estimate of fourth-quarter GDP growth to 0.5 percent, down from 0.6 percent a month ago.
Chris Williamson, Markit’s chief economist, said: “The services sector remained the key driver of the UK’s economic upturn in December, helping to offset the recent weakness seen in manufacturing and putting the economy on the starting block for another year of 2 to 2.5% growth in 2016.”
Labour leader Jeremy Corbyn’s reshuffle of the shadow cabinet has led to several MPs resigning in protest.
Corbyn sacked EU policy chief Pat McFadden for disloyalty after McFadden criticized his stance on terrorism, in an attempt to regain control of his increasingly divided party. Two further MPs, Jonathan Reynolds and Stephen Doughty, resigned in protest of his dismissal.
However, Shadow foreign secretary Hilary Benn – who recently publicly disagreed with Corbyn on the subject of bombing Syria in an impassioned speech in the House of Commons – managed to keep his post during the reshuffle.
Other changes in the cambinet include anti-Trident MP Emily Thornberry replacing shadow defence secretary Maria Eagle, who has moved to Culture to replace sacked Michael Dugher.
Corbyn’s shadown cabinet now consists of 17 women and 14 men.
2015 saw the increased use of crowdfunding and private investment in Fintech firms – but also a decrease of IPOs and trades on the stock market. So what does the future hold for the stock market? In the modern world, has the traditional ambition to graduate to public company become irrelevant?
Increase in private funding
Fintech, one of the largest growth sectors, remains for the most part privately funded. Far fewer tech companies than expected floated on the stock market in 2015, instead choosing to stick with the copious private investment being offered and keep their finances away from prying eyes. Private funding rounds totalled $51 billion, according to CB Insights – more than six times the $8.26 billion raised in US tech and Internet public offerings this year.
The number of companies in the industry did go public, 48, was one of the lowest ever according to data compiled by Bloomberg and many such as Etsy have share prices hovering at below IPO levels; market volatility has, understandably, led to many companies delaying their IPOs.
Increase in crowdfunding
The growth of crowdfunding has meant that finding hedge funds or very wealthy angels to invest is not the only way to achieve private funding – funding from the public is also now a viable option and has grown exponentially over the past couple of years.
Crowdfunding five years ago was a relatively small industry, accounting for $880 million in 2010. However, the crowdfunding industry grew to over $16 billion in 2014 and is on track to account for more funding than venture capital. The World Bank estimates that crowdfunding will reach $90 billion by 2020, but if the current rate of growth continues, that figure will be hit by 2017.
Crowdfunding has revolutionised the world of business finance and has been transformed into a viable form of investment, encouraging many companies that perhaps would have looked at going public to stay in the private sphere a little longer.
Decrease in the market’s popularity
2015 was a rocky year for the stock market, hit by crises in both Greece and China over the summer, and so far 2016 hasn’t been much better. It seems that companies are picking up on the risks associated with the market and, whilst there is ready private funding available, staying out of the public sphere.
Data going back 25 years shows that new IPOs are steadily decreasing, and 2015 was another bad year. The annual rate of companies joining global stock markets halved in the decade after 2000 compared with the decade before, according to the Organisation for Economic Cooperation and Development.
Furthermore, the volume of trades on the London Stock Exchange has steadily declined since 2008, with overall activity in the stock market decreasing over the past eight years. This inactivity, combined with the uncertainty and volatility of the stock market, could well be a reason why private companies considering floating are staying away.
Data: London Stock ExchangeSo is this the end of the stock market as we know it?
Whilst unicorn companies are riding a wave of private investment at the moment, in the long term this may not continue. Talk is already rife on the subject of whether companies such as Dropbox, which is currently valued at $10 billion, are worth their lofty valuations when their technology is such a fast-moving industry and staying ahead of the crowd is so difficult. Crowdfunding is an excellent option for raising short rounds of cash for short term expansions, but is not really a match for the amount of capital offered by floating on the stock exchange.
However, over the past decade, there have certainly been changes to the way companies aim to expand and finance their business – with the general trend leaning towards keeping companies privately-owned for as long as possible. And with fewer regulations to comply with and a lesser need for transparency, its easy to see why.
The price of oil hit an eleven-year low on Wednesday as tension between Saudi Arabia and Iran increased, leaving an agreement to cap output on oil increasingly unlikely.
Saudi Arabia cut diplomatic ties with Iran on Sunday after protesters ransacked the Saudi embassy in Tehran, protesting against Saudi’s execution of a senior Shia Muslim cleric. The United Arab Emirates (UAE) has also downgraded its diplomatic relations with Tehran.
Whilst increased tensions between Middle Eastern countries usually trigger an increase in the price of oil, in the current market the opposite has proved true. Oil prices have fallen even further than their recent rock bottom, wiping 8 percent off the price of oil in the last three trading days alone and making an agreement between OPEC members on a cap on oil output increasingly unlikely.
Both WTI Crude and Brent Crude are currently down 2.2 percent, at $35.97 and $36.42 respectively.
