US and Asian investors flock to European tech


European technology companies are set to raise a record USD34b in 2019
Chief Investment Office22 Nov 2019
    Photo credit: AFP Photo


    US 

    A gauge of US consumer sentiment improved for the first time in five weeks, though surprisingly without the help of Republicans, whose confidence slipped to the lowest since May 2018 as impeachment hearings got under way on Capitol Hill.

    The Bloomberg Consumer Comfort Index rose to 59.1 the week ended 17 November from 58 the prior period, reflecting better assessments of the US economy, personal finances, and the buying climate. A separate monthly gauge of economic expectations advanced in November to a four-month high.

    From a partisan perspective, the improvement in consumer comfort was due to more optimism among Democrats and political independents, while sentiment among those who vote Republican fell for the fifth straight week. Republicans’ confidence has slumped more than 10 points from a record in early September as Democrat-led House impeachment hearings continue.

    The overall index remains historically high and close to this year’s average. The monthly expectations index showed 32% of respondents view the economy as improving, while 30% say it is getting worse.

    Meanwhile, US equities slid Thursday (21 November) following losses in Europe and Asia as traders weighed conflicting signals about the outlook for a trade deal between Beijing and Washington.

    The S&P 500 Index fell for a third day, the longest losing streak in almost two months, but remained within 1% of a record high. The benchmark closed 0.16% lower at 3,103.54. The dollar held steady and Treasuries dipped as China’s chief trade negotiator reportedly said he was “cautiously optimistic” about reaching a phase-one accord. Pessimists focused on speculation US President Donald Trump may sign legislation backing Hong Kong protesters, setting up further conflict between the nations. – Bloomberg News.

     

    EUROPE

    US and Asian investors are piling more cash into Europe’s Technology sector, drawn by a growing number of successful start-ups and its relatively neutral status as tensions between Washington and Beijing simmer.

    While the total invested in Europe is still much smaller than Asia and the US, it is growing while they stagnate or shrink, the report shows. European technology companies are set to raise a record USD34.3b in 2019, up from USD24.6b last year. By contrast, investments in the US are slightly down from USD118b last year, while dropping off sharply in Asia to USD62.5b after a steep increase in recent years.

    North American venture capital funds poured almost USD10b into Europe this year, up from USD5.8b in 2018, while Asian funds have invested USD4b, up from USD1.7b, according to the report, which estimated full-year figures based on the first nine months of the year. The report is based on data from organisations including the London Stock Exchange and the European Investment Fund, as well as a survey of founders, investors, and developers.

    The growing influx of foreign capital comes as the US and China have been locked in an ongoing trade dispute for the past year, with tariffs roiling financial markets. The world’s two largest economies are seeking to close a preliminary agreement to end their trade war, but negotiations remain tough.

    The “unprecedented level of interest” in European technology is also driven by the strength of the companies in the region, a researcher said, pointing to the 99 venture-backed firms in Europe now valued at more than USD1b, up from 22 five years ago.

    Still, the cash is not necessarily being distributed equitably. A lack of diversity persists in Europe’s Technology sector. In 2019, 92% of all funding went to all-male teams in Europe, and funding for all-women teams is declining, according to the report. About 84% of the founders surveyed identified as white, while less than 1% said they were black, African, or Caribbean. – Bloomberg News.

    The Stoxx Europe 600 Index closed 0.41% lower at 402.22 on Thursday (21 November).

     

    JAPAN

    Sony Corporation is in talks to acquire a stake in the Indian television network controlled by billionaire Mukesh Ambani, as the Japanese giant seeks to tap booming demand for content in the South Asian nation, according to people familiar with the matter.

    The Tokyo-based company is currently conducting due diligence on Ambani’s Network18 Media & Investments Ltd before any possible offer, the people said, asking not to be named as the information is not public. Sony is considering several potential deal structures, including a bid for the company or a merger of its own Indian business with Network18’s entertainment channels, one of the people said.

    Talks are at a preliminary stage and may not result in a transaction, the people said. Shares of Network18 surged as much as 19% in Mumbai on Thursday (21 November), while unit TV18 Broadcast Ltd jumped 9.7%.

    While a successful deal may help Sony bolster its local offerings and take on upstart rivals such as Netflix Inc, it will give Ambani access to international content. The Indian tycoon’s wireless carrier, Reliance Jio Infocomm Ltd, has spent almost USD50b in the past few years on its network to disrupt India’s telecommunications industry and has been luring users by offering local and overseas programming.

    The talks come at a time when competition is heating up for paying viewers in a potentially lucrative market with more than half a billion smartphone users. Streaming companies such as Netflix to Amazon.com Inc’s Prime are increasingly offering programmes created locally to lure subscribers. Ambani’s Jio, while having the technology platform, is limited by the paucity of content it can stream, making such a deal with Sony crucial.

    Sony operates in the South Asian country through Sony Pictures Networks India, which has a bouquet of channels including Sony Entertainment Television, reaching over 700m viewers in India. TV18 Broadcast owns and operates 56 channels in India spanning news and entertainment. It also caters to the global Indian diaspora through 16 international channels. – Bloomberg News.

    The Nikkei 225 Index rose 0.11% to 23,063.55 on Friday (22 November) morning. The benchmark declined 0.48% to 23,038.58 the previous session.

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