John Haynes (pictured), Head of Research at Investec Wealth & Investment, comments on Softbank’s proposed acquisition of ARM…
The announcement of an agreed bid for ARM Holdings by Softbank of Japan is the clearest illustration possible of the consequences of the current global currency volatility. Assuming the bid price, Softbank is paying over 25 per cent less in yen terms compared to over a year ago to acquire this crown jewel of UK, and indeed global, intellectual property. The devaluation of sterling will continue to provide interesting investment opportunities for overseas investors to buy UK assets, including central London property, at a discount.
The repercussions of the Brexit decision have yet to be felt. Over the next six to nine months we will see not only the direct effect on growth in the UK and Europe of this blow to business confidence, but also the impact it has on the political landscape. We should take some reassurance from recent market action as it was a high profile challenge to the resilience of the European financial system. The measures central banks have put in place to address outside “shocks” passed an important test, which is an endorsement of the progress made since the Eurozone crisis. Furthermore, as last week’s non-European data indicated, the world economic picture still has many bright spots. The US remains highly resilient whilst the picture in emerging markets is improving. If the last two weeks has taught us anything, it is that Britain is not as important to the world as the world is to Britain, hence the importance of retaining a global perspective when making investment decisions.
Our view prior to Brexit was that the world would “muddle through” and risk takers would be rewarded for their steely nerve. Our view now is the same, but there is less margin for error and a higher level of background political risk.
