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09 August 2021

Inflation Overshoots Bank of England Estimates

Taking a look at global equity markets, Japanese technology group SoftBank, which is known for ‘Nasdaq Whale’ Trades, has acquired a US$5bn non-voting stake in the Swiss healthcare giant Roche, which specialises in diagnostics and pharmaceuticals. This was made possible by Akshay Naheta, the former Deutsche Bank trader who runs SB Northstar, a SoftBank arm set up last year to manage the investor’s public equity trades. Naheta has been involved in some of the most controversial investments made by SoftBank, such as Wirecard, the now insolvent and disgraced German payments company. The deal came a few months after Masayoshi Son, the SoftBank founder, informed investors about scaling down investments made by SB Northstar after its blockbuster loss of US$5.6bn since its inception. SoftBank’s shares fell 1.1% last Wednesday, citing problems with the company’s due diligence process.

The recent focus of the fund has changed from technology and early-stage Biotechnology companies to well-established blue-chip companies in an attempt to diversify the portfolio and reduce overall risk exposure. Fitting with this new focus, Roche is one of the largest pharmaceutical companies globally which focuses on diagnostics, cancer drugs and treatment for immune conditions along with infectious diseases and neuroscience.

The company has witnessed increased demand for its diagnostics products due to COVID-19. In the first half of 2021, diagnostic sales grew 51%, making up approximately 30% of the company’s overall revenue and helping its shares rise 18% in 2021.

Closer to home, UK inflation has overshot the Bank of England’s (BoE) forecast for a third successive month. Hitting 2.5% in June, it is now expected to peak at around 4%, increasing pressure on the BoE, with supply chain disruption and higher fuels costs pushing inflation higher. The debate over whether inflation is here to stay or is simply a short-term effect of the pandemic bounce back is an ongoing affair. While Andrew Bailey, BoE Governor, stated last month that the jump in inflation was primarily due to the combination of fluctuations in energy prices and short-term bottlenecks in global supply chains, inflationary pressures would ease once consumers spread their spending more evenly over both goods and services. The BoE is conducting an internal review to ascertain the process of reverting the stimulus and winding down its quantitative easing programme after it had risen interest rates to at least 1.5%. However, it is unlikely that the Monetary Policy Committee will reach a conclusion until later in the year.

Leeds-headquartered Avacta Group has begun shipment of its COVID-19 lateral flow test. The company confirmed the AffiDX SARS-COV-2 antigen lateral test, a high-performance, 20-minute antigen test using nasal swabbing, is now CE marked for professional use in the UK and EU. Avacta is now exploring opportunities with distributors and end users in Europe, UK, Asia, with the company also appointing Calibre Scientific, a diagnostic and life science products company, as the first distributor for the test in the UK.


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.
 
Inflation Overshoots Bank of England Estimates
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