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31 August 2021

Asia Moving Towards Post-COVID-19 Economic Policy

In the Global economy, Asia is slowly heading towards post-COVID-19 economic policy, with South Korea - an economic giant - among the first of Asian countries to start increasing interest rates, by 0.25% to 0.75%. This is due to fears over rising property prices and record high household debt. South Korea is currently undergoing a dilemma when planning their financial policies. On one hand the country has ever-rising household debt which sits at US$1.6tn in August 2021, on the other hand, the fears of uncontrolled inflation may pose ever-challenging pressure on the economy. A rising interest rate will tame the latter, but could make the former unsustainable. This is the first time the country has increased interest rates since September 2018, though this has not reached its pre-pandemic level yet (1%). The increase in demand for Korean-made electronic products and transport, a key export for the world, has been recovering well and it is expected that the country is on track for gross domestic product growth of 4%.

Focusing closer to home, UK-based PureGym is eyeing global expansion and has appointed advisers to work on a potential initial public offering for the company’s expansionary plans as the interest in fitness continues to grow. The company stated that all 506 gyms across UK, Denmark and Switzerland are operating with minimal COVID-19 related restrictions. Furthermore, total gym membership has recovered well and now stands at over 90% compared to pre-pandemic levels with 1.61 million members.

As a bounce-back in demand comes through, PureGym is returning to its pre-pandemic growth trajectory aiming to open multiple new gyms across the world from the Middle East all the way to the US before the end of 2022. The company informed bondholders on Thursday that their intention is to tap into growing opportunities in the fitness industry without ballooning their total debt. The company currently has a net debt position of £810m and must pay £30m of deferred rent to which they are trying to negotiate with the landlords to pay over a longer period.

In Yorkshire, Leeds-based logistics company, Clipper, experienced revenue growth of approximately £195m, an increase of 39% over last year. The boost in revenue comes as the company focuses on e-commerce comprising 69% of the total revenue with £420.9m, an increase of 52% from last year. As it expands its customer base with addition of Amara living, Hope & Ivy, Joules, N Brown, Simba Sleep, and the Very Group. In addition, it has maintained their long-term relationships with ASDA, John Lewis, PLT and FARFETCH. The key to the company’s rapid growth lies in its approach of capitalising on its fast-growing markets such as Fashion, Beauty and Luxury products, representing a majority of the company’s total e-commerce revenue. Clipper is a live example of how a company sitting in a traditional business segment can see rapid, sustained growth by infusing technology into its operations.
 
Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
Asia Moving Towards Post-COVID-19 Economic Policy
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