Will Labour Save Theresa May’s Brexit Bacon?

Anyone who has ever seen Prime Minister (PM) Theresa May battle Leader of the Opposition Jeremy Corbyn in the House of Commons would find it borderline impossible to imagine any kind meaningful political union between the two parties. Historically, the Tories (as Conservatives are known locally) and Labour vehemently disagree on practically everything in contemporary politics – from austerity, to corporate taxation, unions, education, and far more. And yet, as the PM nervously clings to her so-called Chequers deal – her vision for Britain’s future relationship with the European Union (EU) and the basis for her upcoming Brexit negotiations – an unholy alliance of desperation and convenience is brewing between the two parties.

Brexit Bacon
Will Labour Save Theresa May’s Brexit Bacon?

Key Brexit-supporting Tory Members of Parliament (MPs) are deeply dismayed by the Chequers deal, saying that it fails to deliver the ‘hard Brexit’ for which the people voted, and are therefore threatening to abandon their leader should it come to a vote in the House of Commons. On the other side Labour MPs have been ordered by their leader Corbyn to vote against Chequers on the basis that it fails to meet the six tests the left-leaning party have set to establish their definition of what a good Brexit deal would be. Were May’s Chequers deal to be voted down in the House of Commons, it would effectively end her time as PM and – as Corbyn hopes – will likely lead to another general election, which the Labour leader would hope to win. Given the vitriol between the two leading British political parties, one might take it as a given that Labour would only be delighted by the idea of a Tory PM battling desperately for her political life with enemies of all persuasions knocking on the gates of 10 Downing Street.

And yet, politics are not so simple these days, something that holds true for both the Tories and Labour. There are potentially over 30 Labour MPs who are strongly considering defying their leader and supporting the PM’s Chequers deal as they fear the economic consequences of a no-deal Brexit. Such is the depth of their concern that will consider betraying Corbyn even if it means inadvertently propping May up and keeping Labour out of power. On the other side, the most dogmatic Brexiteer Tory MPs – chief among whom Jacob Rees-Mogg, Boris Johnson, David Davis and Steve Baker – along with another 30 or so of their parliamentary colleagues are poised to defy May and vote down Chequers, presumably to preserve their slim hopes of a pristine hard Brexit. Of course, they must be aware that failing to support May might come back to bite them, particularly if toppling her brings forth another general election that results in Labour, not them, in the Brexit negotiation driver’s seat, a scenario which some have suggested might see Brexit called off entirely. What we have in front of us is a near perfect syllogism by which both parties are putting their Brexit concerns and aspirations over traditional party politics and ambitions.

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The Conservative and Labour parties are putting their Brexit concerns and aspirations over traditional party politics and ambitions.

Despite Labour MPs overwhelmingly supporting Britain’s EU membership, there are seven in their ranks, with the notable inclusion of leader Corbyn, who can be classified as Euro-skeptics or even ‘card-carrying’ Brexiteers.  Yet, even beyond this minority group there are a wide range of Labour MPs who represent Brexit-heavy constituencies, which means that many will be forced to consider abandoning their own views to pander to their voters’. Beyond this awkward dilemma, for Labour MPs a May-brokered deal is vastly preferred to a no deal Brexit. As such they will face what one shadow minister referred to as a ‘crisis of conscience’: on one side the party leader telling MPs to vote ‘no’ to Chequers and help catapult Labour into government; on the other side the wishes of Brexit-voting constituents and the havoc a no-deal Brexit might wreak on Britain’s stuttering economy.

Labour MP Kevan Jones from North Durham is among the many in this predicament and he indicated that he would be open to supporting Chequers in Parliament. He said: ‘I would not support [a] no-deal [Brexit] because that would be disastrous both for my constituents and the country.’ Jones’ Labour colleague Lisa Nandy, MP, is also worried about how a no-deal Brexit might affect her Wigan constituency, and if what May brings to parliament is deemed good enough she will feel pressure to support it. Nandy said: ‘The public wants [Brexit] over, they are fed up with this and want it done so the government can get on with other difficult decisions. There is a push from the public to just sort this out.’ Another Labour colleague anonymously added that while it will not be easy for Labour MPs to defy Corbyn and back a Tory government – far from the neat and tidy solution that Labour would merely stroll into 10 Downing Street in another general election – there is a real threat that an ideological hard Brexiter like Rees-Mogg might be the next PM who will pursue either a hard Brexit or a no-deal Brexit. Therefore, even with the false choice of two unappealing alternatives; i.e. Chequers or a no deal Brexit, May’s vision for some Labour MPs might seem the more palatable.

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Theresa May’s Brexit vision will likely seem more palatable than a no-deal Brexit for Labour MPs on the fence.

Within May’s Conservative party it is clear that those who oppose Chequers will not budge and will vote it down in Parliament if given the opportunity. One might say that this is rank and brazen stupidity (if one were a Tory and/or Brexit voter) as surely a Chequers Brexit is better than risking an even softer Brexit or even no Brexit at all under a Labour government. And yet Rees-Mogg and his eurosceptic crew are prepared to risk this and topple May’s government if it is the only remote way to achieve their perfect hard Brexit.

With daggers pointed at May from all directions, will she accept re-enforcements from her sworn enemy? One would imagine that reaching across the aisle, as it were, would be among the bigger ‘no brainers’ in the PM’s career… That is, if she’s given the opportunity. Yes, despite the borderline impossible situation May is facing domestically, there is a tangible threat that she many never be able to give her Labour colleagues the chance to save her Brexit bacon. Upon hearing the details of Chequers EU leaders, chief among whom President of the European Council Donald Tusk, German Chancellor Angela Merkel and French President Emmanuel Macron, rejected it out of hand based on its solution for avoiding a hard border between Northern Ireland and the Republic of Ireland; i.e. what will be the only land border between the EU and UK. Chequers sets out a vision whereby the whole of the UK would remain in the EU custom union for a limited time while a reasonable trade solution is worked out. EU leaders have said such a concept is unacceptable, which means that as things currently stand, there is serious doubt as to whether the EU will even consider entertaining Chequers in its current form. If the EU rejects Chequers, it will never ever be put to a vote in the House of Commons, making May’s unlikely Labour allies irrelevant.

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If Theresa May’s political shrewdness out-maneuvers her European counterparts and she brings a Chequers-inspired Brexit deal back to Parliament, will Labour’s support even be enough?

And yet, in the event that May’s political shrewdness out-maneuvers her European counterparts and she manages to bring a Chequers-inspired Brexit deal back to Parliament, will Labour’s support even be enough? Not only have there been estimates of up to 80 Tory MPs who view Chequers suspiciously, on a good day May’s government only has a majority – albeit a slim one – in the House of Commons only because she is propped up by the 10 Democratic Unionist Party (DUP) MPs from Northern Ireland. Depending on the agreement May makes regarding the Irish border, the DUP’s support may be called into question. In a scenario in which she is coerced to accept a version of the EU’s solution for the Irish border – their so-called ‘backstop’ that would see Northern Ireland remain in the EU customs union and single market on a temporary basis while the rest of the UK existed on the outside – the DUP would withdraw its support from Chequers. In the words of Arlene Foster – leader of the DUP – her party’s only ‘red line’ is a situation in which Northern Ireland is treated differently in customs or constitutionally than the rest of the UK. She said: ‘We don’t know what will happen in five or 10 years’ time. We don’t want Northern Ireland going off in a different direction from the rest of the UK.’ To say that the PM is in a tight spot is an understatement, as it is clear a sleight of hand or some other magic trick will be necessary to resolve the conflicting needs of the EU and the DUP just to give willing Labour MPs a hope and a prayer at turning her Brexit vision into law.

Why is Brazil doing so well in the current geopolitical climate?

Since 1980, the Brazilian economy has consistently underperformed compared to other LatAm markets, but the end of July may be showing promise of returning to the glory days. With workers often striking and a questionably inefficient public sector – Brazil often struggles to keep afloat financially. It seems that 2018 has been the year of buoyancy for the brasileros. In the rubble of the current trade conflict – Brazil may re-establish itself as the captain of Latin American markets.

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Since Trump declared a trade war with China, Brazil has found itself in a strong position. Seeking alternatives, the Chinese have begun trading with Brazil to fill the gap left by sanctioned American supplies, which have been taxed by up to 25%. Should they continue to build this trade relationship, Latin American emerging markets could profit significantly – with Brazil at the spearhead.

Brazilian stocks have been rallying as their domestic political environment improves and they take the mantle as a primary beneficiary for the U.S.A.’s trade war with China. The Bovespa Index has since jumped 12% during the past month while the iShares MSCI Brazil Index ETF has also risen by 12%.

As exportation makes up a mere 13% of the Brazilian GDP, they are relatively unaffected by external events. However, they still remain the largest exporter of food, soft commodities, and minerals – coincidentally, the same exports that China previously bought from America. These two aspects should be seen as the reason China would turn to Brazil – a somewhat stoic economy with expertise in exports that the Chinese have been deprived of. Because of this, should the Chinese decide to continue trading with Latin America, the Brazilian GDP will most likely prosper.

Peter Donisanu, an investment strategy analyst at Wells Fargo Institution, has claimed that there is an improvement in risk sentiment across emerging markets and Brazil is piggybacking off of that. He continues arguing that recent easing of trade tensions between the U.S. and some of its key partners has improved sentiments around emerging markets, and consequently, Brazil.

While there has been an improvement in risk sentiment, as Donisanu claims, LatAms sudden boost seems to be directly correlated to recent political events, and it would be a large coincidence to say otherwise. While Brazil most definitely is piggy backing off attitudes towards emerging markets, their disproportionate boom should be attributed to the Chinese interest – not a general interest.

Who Will Be Affected by China’s Trade War?

After sitting on the cusp of a financial war with China, the U.S.A. has finally unleashed their tariffs on Chinese goods after accusing them of stealing intellectual property in March. This back-and-forth disrepute of imposing tariffs on certain items will have a backlash on the citizens of both countries as China seek to reprimand the U.S. The Chinese have since stated has since stated that although they did not start this conflict, they will fight back.

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Chinese technology is receiving a 25% tariff due to accusations by the Trump administration that the Chinese stole intellectual property which optimizes semi-conductor chips. These chips are found in most electronics, ranging from televisions, personal computers, iPhones, and cars. Unfortunately, it seems that the U.S. consumer will most likely be footing the bill as China’s production pricing will remain the same, but the cost to American citizens will increase by 25%, and the Chinese will not be covering these expenses.

China will not take a hit to its economy lightly and have already planned their retaliation by focusing their own tariffs on a wide variety of U.S. exports. This ranges from plastics, to nuclear reactors, to even dairy making equipment. China must be vigilant and handle these tariffs sensibly as Chinese brokerages are sitting on more than £240 billion of loans that grow riskier by the day as China’s equity market tumbles. Losses on the debt could wipe out 11pc of the industry’s net capital, the U.S. bank reported in July; and we suspect this is something U.S. Administration is aware of.

The reality could be more than fist wagging as this tariff war is the biggest economic attack in history. Although undoubtedly better than boots on the ground, this conflict still poses a threat to Americans and Chinese citizens. Firstly, American citizens have a lot to lose beginning with the aforementioned 25% tax they are going to need to pay on certain goods. Further issues include a shrinking market from Chinese buyers, and even rotting livestock due to smaller demand which will heavily affect farmers in the red Mid-West as they lose access to China’s market and are left with excess goods.

It seems likely that the war will not take place in the open, and the real battle will be “on the flanks in the form of unnecessary inspections, product quarantines, and heightened regulatory scrutiny” says James Zimmerman, a partner in the Beijing Office of International Law.

But in reality, this war affects everyone across the globe. With reduced access to the U.S. market, China’s growth may come to a halt which would have a knock-on effect to all world economies. Increased caution and confidence for business will cause uncertainty within China’s market and puts expansion plans on ice. With the two biggest economies grinding themselves against each other, could there be space for a third party to intervene?

Italy’s Harlequin Performance

The laughable situation in Italy in which the traditional political parties struggle for majority votes at the behest of the populist movement “5 Star” (MS5) is somewhat remnant of the Renaissance theatre style commedia dell’arte. MS5, the ambiguous and enigmatic harlequin-esque populist movement, has danced its way into mainstream politics taking a large slice of votes from the Right-Wing parties, who are now screaming “encore” as they attempt to scramble enough power to encourage a second election. But why have these events had a tumultuous effect on the rest of the world?

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The political drama began when the MS5 seized power through their refusal to bow down to political elites. This is not the typical Left vs. Right epidemic we see in most Western countries, but more of a working class vs. elite struggle like the Catalonians against Franco or British Labour reforms in the 60s. At this stage, MS5’s aim seems drastic – this is not just about a reform, this is about a revolution with a focus on domestic empowerment, immigration issues and the European Union alongside a strong hatred of the mafia. But nothing is set in stone, and due to this, Italy are currently proving real tricksters to label which is a massive turn-off for international investors.

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Geo-political issues and rapid social change tend to not bolster share prices, and since the beginning of this new chapter, Italy’s stocks have gone on sale. Rocky prices like we have seen it Italy do however tend to draw in the braver investors who hedge their bets on the dangerous side. Unfortunately, the sale prices don’t match the level of volatility in political stability, and therefore don’t seem to be a great bargain. This of course puts off even the high-risk investors. JP Morgan strategist Mislav Matejka noted recently that there is a poor risk-reward going forward giving the strong run and the political overhang.” It seems that nearby German equities have been the preferred route for most investors after taking profits on Italian stocks.

This mass sell-off of Italian stocks was originally triggered by fears of a second election and investors fear of Italy ditching the Euro, which currently seems highly likely. Investors have decided to keep their money in their pockets for now until the situation cools down with SocGen trio warning that buying could remain weak for several months.

Italy’s performance hasn’t just affected Europe, it managed to dance its way across to the Atlantic and cause the Dow Jones Industrial Average to drop 391 points. Although the Dow Jones made a huge recovery, making back most of the May dip, it is still undeniable that Italy’s Euroscepticism and quick social change managed to scare even the Americans.

No one can predict the ending of this drama, and although for now it seems that Italy have put forward a government, we don’t know if we are at the beginning or end of this unbridled saga which will likely continue to tighten the strings on investors’ wallets.

 

Just What Is Happening with Brexit?

Since the Brexit vote of 2016, British politics has been tumultuous with inter- and intraparty disagreements causing investors to treat FTSE and UK market investments as high-risk. So far, the most damaging aspect of Brexit seems to be uncertainty. Beyond the ramifications of leaving the EU, analysts are struggling to predict what a post-Brexit Britain will be like. It is difficult to predict how red tape around the Customs Union, which greatly benefits the British economy, will affect British trade, market capitalisation, and deciphering whether the market is undervalued or not.

The constant battles and disputes surrounding the legitimacy of Brexit and how Britain should go about it are frequently voiced in the House of Commons, appropriately reflecting the nations division over Brexit. Despite disunion being apparent between the two main British parties, Conservatives pushing for Brexit and Labour for a second referendum, there is a glaring divide notable within the Labour party – the left-wing alternative in the British parliamentary system.

Although individual Members of the Labour Shadow Government Parliament are for the most part Remainers, the party is a life-long Eurosceptic which is an obvious conflict of interest. Voters are very aware of this, and it is making Labour’s position on Brexit unappealing and creates more confusion among the electorate. Ex-British Labour Prime Minister Tony Blair has come out of the woodwork and criticised the current shadow government leader Jeremy Corbyn’s policies as being “the worst of both worlds”.

Following from this glaring division, an unforeseen issue has arisen in Ireland as talks of a hard border are discussed. Northern Ireland will follow Britain out of the EU, but Ireland will not. This issue was made more prominent when Theresa May stated recently that Britain is leaving the EU and will not softly exit the customs union.

This debate could reopen a healing wound with Northern Ireland by raising the issues of borders between the Ireland and Northern Ireland causing more political instability. Four political parties have backed Northern Ireland staying in the single market – stating that there should be no hard border between Ireland and Northern Ireland – and Ireland and the rest of the UK. This is also being supported by the DUP who propped Theresa May into power during the last election.

These political conditions reflect peoples’ uncertainty as to what will happen. Since the referendum, there have been market crashes, volatility, and stagnation in house prices all related to the vote.

Theresa May has opened the Conservative sails to the wind with her firm Leave stance when addressing the EU last week, stating that Britain will not be “climbing down” and will leave the Customs Union. Hopefully, Britain will decide soon how it will tackle leaving the EU so that it can begin reshaping itself according as currently no one seems to know what is going on, making it tricky for investors to trust British markets.

Oil Prices – Who Wins and Who Loses?

Due to Trump’s recently announced Iran trade sanctions and OPEC led geopolitical shifts, oil prices have soared to a three and a half year high since March 2018. Saudi Arabia are set to benefit greatly from this if they look to use the opportunity to diversify their economy, but consumers will be left footing the bill all around the world as companies pass on their new oil expenses.

Donald Trump is reinstating sanctions on Iran, one of the world’s major oil suppliers, claiming the deal was a “horrible agreement” and “an embarrassment” during his speech on Tuesday, May 8th. In restricting trade with Iran, he inadvertently increases the price of oil by reducing supply to the market. This has happened at a point in which crude oil prices were already estimated to breach the $80 mark due to other geopolitical factors.

Aside from Trump’s involvement, OPEC has rallied its efforts to reduce exports, curtailing the quantity supply to the demand, therefore erasing a global surplus. Consequentially, we could soon see a global shortage of crude oils – theoretically increasing the value of crude oil for years to come. Other factors include a 0.6 million barrel per day reduction in supply from Venezuela due to domestic issues, aging wells naturally depleting all over the world, and exhausted supplies from China and Angola.

Saudi Arabia, who can use the money from oil to diversify its economy from this single commodity propping up its market, are set to benefit from this opportunity greatly. These circumstances fuel its long-term “2030 vision” which seeks to lessen domestic reliance on oil. Unsurprisingly, this OPEC member has led the way in curbing supplies by 0.7 million barrels a day since 2016.

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Although OPEC countries will thrive in this economy, airlines may experience some turbulence as they pass on surmounting costs to the consumer. They will inevitably have to dump the pain of expensive fuel unevenly to jetsetters meaning flights prices might increase above inflation. Airline analyst Savanthi Syth claims this will mainly affect leisure travel lines – whose consumers are highly price sensitive – and are more loyal to price than to brand. This is opposed to business travel airlines, who will not suffer much grief in passing the costs along.

Despite this, budget airlines could use these incidents to push their brand as being the cheapest – taking a short term hit to profit and hoping for long term loyalty after the oil hype dies down – if it ever does.

 

Is It Finally Euro-Russian Economic Armageddon?

Russia’s economy is heavily reliant on the European Union (EU). Over the last six years, we have seen a decline in trade relationships between the neighbours with EU investment falling by heights of as much as 44pc in 2014. Could the recent alleged Russian chemical attack in Salisbury, Britain hammer the final nail in to the coffin of an already dying economic relationship?

The EU/Russia trade relationship is based on the price of oil. Here’s why: The EU market’s relationship with Russia is dependent on the growth of the Russian economy, but this growth is intrinsically linked to oil prices. If this commodity does badly, then Russia does badly. Since 2011, and most significantly 2012-2016, the price of oil began to a steady decline – which is correlated to the weakened financial partnership between the EU and Russia. This was seen most notably at the end of 2015, when hydrocarbon exports were down 42pc from 2012. This subsequently leaves Russia in a weakened financial position – they could not burden further blows and remain buoyant in their current economic situation.

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But the Salisbury attack could be the last straw. Western states have already begun an exodus of Russian politicians from their embassies which worsens Russia’s geo-political influence worldwide.  So far, this has had no impact on the EU/Russia trade deal. Yet, if these sanctions begin to affect trade relations, Russia’s economy could find itself on life support as it stumbles toward a nadir. Its economy is already being pressurised by the decline in oil price, and a dwindling relationship with the EU – trade sanctions would leave the Russian economy in a hopeless situation, seeking alternative solutions.

It seems Russia is  aware of this and have begun reaching out to alternative markets to keep their economy afloat. In difficult circumstances Russia has reached out to Turkey, a nation who has been trying to gain access to the EU for years but has been rejected for a myriad of reasons – most notably their poor human rights record. Earlier this month, Putin joined President Erdogan at a ceremony for a Russian made Nuclear Power Plant. This isn’t the first sign of a romance brewing between the two nation states. Over Christmas they finalized an agreement that Turkey would purchase their S-400 Missile Defence System. Aside from this, they are building the Turkstream pipeline to transfer Russian gas to Turkey. Will Russia need the EU if relationships blossom with alternative markets? They have reached out to Turkey, but could this become a patterned behaviour?

DISCLAIMER: This message is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell any securities. Past investment performance may not be indicative of future investment performance. 

Financial Ramifications of the UK Response to Russia’s Chemical Attack

From the outside, the purported Russian chemical attack in Salisbury, England is reminiscent of your favourite spy novel – one by John Le Carré, perhaps. The story might go a bit like this: a former Russian intelligence officer living in exile, enjoying lunch with his daughter at a popular local Italian restaurant, only to be found left for dead on a nearby park bench alongside a range of questions like How? Why? And Who? Unfortunately, this compelling drama isn’t a novel but real life, and as British-Russian relations tumble to a post-Cold War low as a result, how will this ordeal impact these two great nations’ economies?

By of the end of March 2018, over 200 diplomats have already been expelled from over 20 countries in Europe, Australasia, and North America in solidarity with the UK against Russia’s alleged aggression. NATO has further removed 7 diplomats from their alliance.  Since the attack, Russia has haemorrhaged political influence as countries turn their back on them to condemn their aggressive behaviour. The question on everyone’s mind is, could this soon escalate and become a financial Cold War?

The London property market and UK banks have long been known to shelter the money of Russian oligarchs. British Prime Minister Theresa May and her government are in the process of deciding whether they should clamp down on these assets and impose a ban on the City of London from helping Russia sell its sovereign debt, a process which props up their economy. It would certainly send a strong message to Moscow that Britain is still a strong international actor – even during the instability she faces during Brexit negotiations.

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Were the British Prime Minister to take this drastic action it is reasonable to expect that Vladimir Putin’s Russia would respond in equally robust terms. In our hyper-globalized world, it should come as no surprise that Russia has influence over socio-political conditions in Britain. The UK’s National Grid has been using Russian natural gas reserves to help keep up with demand for years; in 2015 nearly 10% of the UK’s consumption came from Russia. Although the winter is nearly over, and natural resources may not be important during the summer months, winter always returns, and there is the risk that next year Britain may struggle turning on the central heating.

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The question remains: are economic sanctions and restrictions worth bearing the socio-political ramifications of a stand-off? That remains to be decided. For now, the world waits to see both May and Putin’s next moves.

DISCLAIMER: This message is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell any securities. Past investment performance may not be indicative of future investment performance. 

 

What South Korea Learnt from Sochi’s Winter Games

Hosting the Olympic Games brings with it a recipe for prosperity – and opportunities for disaster.   past, trends have dictated that countries overspend and rarely see returns in the long term. South Korea has decided to take an innovative approach. They cut heavily on spending and infrastructure that usually lies derelict for years after the Games. Maybe they learnt something from recent events in Russia?

 

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The Sochi Olympic Games in 2014 cost Russia a staggering $51bn. During the run-up to the Games, it was made clear that Sochi was to be the most extravagant Olympics ever. The 40’000-mile torch run from Kaliningrad to Chukotka which passed through all 83 regions of the country set the tone for a month of excessive and unnecessary folly. $30bn of the money went into embezzlements to Putin’s close associates while the rest was pumped into ensuring that Russia was portrayed affluently on the world stage. The absence of fair competition in building, strict censorship and clan politics led to sharp increases in prices and low quality of work. Only weeks after the event, Sochi began to fall apart with deserted buildings, empty streets and inhabited almost exclusively by stray dogs. Russia’s taxpayers are footing the bill and seeing very little return.

 

South Korea has learnt from these mistakes. Pyeongchang cut costs by saying no to unnecessary infrastructure and have to build low-cost temporary stadiums in lieu of behemoths that would later sit unused and decay. The stadium cost just over $109m and is set to be used 4 times before demolition. Currently, their frugality is bringing Pyeongchang bad press as blankets were handed out during the opening ceremony as opposed to intense heating. However, this decision is symbolic of their plan to cut costs. Although (like all Olympic Games) South Korea will break their budget of $12.9bn it is still a fraction of what was spent in Russia.

 

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What are South Korea Gaining from the Winter Olympics?

The world’s eye is on Pyeongchang this February as they set the stage for the Winter Olympics. After winning the bid for the Games, South Korea is set to splash out large sums of money to attract positive attention to their country. There have already been huge political breakthroughs throughout the peninsula.

 

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Bidding for the Olympic Games is not an open auction – getting through the application process is not a “survival of the richest”. There is a myriad of factors that are considered when the panel votes for the next host – including infrastructure, financial support, and even human rights records. Amongst all the applicants, three stood out: South Korea, Germany, and France. France was deemed unsuitable almost unanimously receiving only six votes, Germany took in 25 votes and was the closest, but nowhere near close to the winners: South Korea who took home the gold with 63 votes.

 

Hosting the Games is a financial burden. What is South Korea looking to gain out of this? Firstly, we don’t yet know how much the Games will cost, but generally, countries will be expected to dish out no less than $5.2bn. Their profits are most likely going to be indirectly obtained through tourism and stock market attention in subsequent years. Although financial profits are likely – there are more important political and cultural changes that have already occurred.

 

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The Korean Peninsula has been divided since the 1950-1953 war. There was no post-war peace treaty signed, and South Korea boycotted the North in 1988. The Games have seen a diplomatic breakthrough with Kim-Yo-Jong visiting alongside her “army of beauties” – a group of women hand-picked for their good looks, talent, and loyalty to the regime. This is after Kim-Jung-un himself raised the prospect of North Korea’s attendance in his New Year’s speech.

 

It also gives South Korea a platform to show off their world-leading technology. Samsung, South Korea’s biggest company, will use this opportunity to expand their market share which will have positive ramifications for their domestic market.

 

DISCLAIMER: This message is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell any securities. Past investment performance may not be indicative of future investment performance.