Monday, 15 August 2011

Chinese IPOs come back into favour

Chinese companies have often been criticised for their turbulent relationship with UK investors. On AIM in particular they are often accused of not being transparent enough, and it is well documented that investors have had their fingers burnt by some high profile companies.

However, it seems that there is a flip side to this, and one that intuitive Chinese companies can capitalise on. Whilst the preconception is that these types of companies are prone to shying away from regular communication with investors, many fund managers still want exposure to the significant opportunities and vast markets that are present in China across a variety of sectors. There is a great opportunity, therefore, for companies that are prepared to be transparent and communicate openly to make a great success of their time on AIM.

Dongfang Shipbuilding, which joins AIM this week, is intending to leverage the market’s standing and corporate governance guidelines. By listing on AIM, Dongfang’s management intends to promote the Company as transparent and adhering to high levels of corporate governance, which will not only be reassuring to investors, but also help the Company to stand out amongst its peers in the Chinese shipbuilding industry. The Board believes that the European ship owners in particular will feel that the Company’s listed status in London will make it stand out in a crowded market and give a level of reassurance that isn’t possible as a private company.

With AIM listed companies such as China Food Company and Sorbic International putting considerable emphasis on transparency and behaving like Western-run companies but with the direct exposure to the growth in Asian markets, investors may finally be prepared to consider Chinese companies again as a good opportunity. Dongfang’s IPO this week reiterates that there is investor demand for Chinese companies that are well run and willing to play by the rules; and, in turn, they will be rewarded with their new found status as a listed company and the support of UK shareholders.

Henry Harrison-Topham

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Friday, 12 August 2011

Book Review: 'Priceless' by William Poundstone

Intern at Centaur Media plc reviews 'Priceless' by William Poundstone for Mortgage Strategy
Economic principles will tell you that products are priced on the level of supply and demand as well as the cost of production.

It’s true that good businesses will always ensure they make more than they spend but that’s not all.

William Poundstone’s Priceless seeks to explain the dark art of selling and how to increase the selling price by psychological tricks. It provides insight into the underhand techniques that used-car salesmen and market dealers have been using for years.

These Jedi mind techniques will come in handy for mortgage brokers after one large firm recently revealed it has a 100% target for protection sales.

Cross-selling protection is crucial now and Priceless offers guidance to help you sell more and earn more. One technique is explained through a simple behavioural trick renowned in economics circles.

The book poses two questions. First, is the number of African countries in the United Nations higher or lower than 65?

Second, is the number of African countries in the United Nations higher or lower than 10?
The average guess of those asked the first question was 45 whereas the average answer to the second question was 25.

The reason the second answer is almost half the first is that the number in the question is used as a reference point. The technique is called anchoring and is often used in sales.
Poundstone cites the example of a canny Broadway producer pricing tickets.

“Cheap seats don’t sell, wanna know why?” he says. “If you price orchestra level or mezzanine seats cheap, people think there is something wrong with them.”

Brokers can use this technique effectively. If they set fees too low clients will consider them worthless so the Stella Artois catchphrase ’Reassuringly expensive’ is one brokers could adopt.

Anchoring can also be used to influence clients. For instance, would you like to pay more or less than £1,000 for your broker fees? Some people will ignore the anchor and think logically but most will be swayed to a higher or lower assumption than they originally thought.

There are other fascinating pricing strategies in the form of bundling of products. For example, when selling a blender it would be acceptable to tell the customer they are buying a blender and that’s all. But Poundstone highlights a salesman who marketed his product as a glass canister, blades, holding pod, electric wire and rotation tools.

Despite being identical, the second description gives the impression that buyers get more bang for their buck. The blender salesman charged more but went on to outsell his competitors.

It is worth remembering that when charging fees brokers should talk themselves up and highlight all aspects of their service. That could include offering quality advice, getting the best mortgage deals, a guide for buying a house and a hassle-free experience.

Poundstone also explains the theory behind techniques such as that used on the popular quiz show, Goldenballs. In the final section where contestants can share or steal a pot of money, Poundstone explains why some choose to steal while others share.

Priceless explains that pricing is never fixed and everything is negotiable. The examples are interesting and there is much to take away from this useful read.

Review by Stuart Hosie

This book discusses the art of what makes for good negotiating and price determination. By examining a series of sales and marketing techniques the book highlights principles which apply to the psyche of the consumer.

A very interesting book review; and recommended for any broker, or any professional who negotiates and interacts with people on a daily basis to have a read.

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Wednesday, 10 August 2011

Apple is world’s most valuable firm

- Steve Jobs is the man-

Recent uncertainty in the stock market yesterday helped Apple to overtake Exxon Mobil to become the world’s most valuable company. However, the innovative work of Steve Jobs should not go unnoticed.

Apple briefly pipped Exxon on 9 August 2011 when the Company’s share price dipped due to a fall in the price of crude oil; a direct result of the market’s concern over The United States’s debt crisis and the increasing threat of a double dip. The USA is the world’s biggest consumer of crude oil and as a result, Exxon Mobil’s share price has seen a 20pc drop since reaching a year high of $87.98 in April 2011. On the other hand, Apple is a blossoming evergreen, with the Company’s share price having almost quadrupled in the last four years. 

City workers, journalists and consumers are questioning how Apple is managing to expand at a time when other companies and even sovereign states are struggling to stay afloat. Could the simple answer be the work and vision of Apple CEO, Steve Jobs…?

The California based tech company is enjoying rapid expansion, with every results announcement continuing to boast record growth upon record growth. Furthermore, analysts do not expect this growth curve to plateau, as most still hold buy recommendations on Apple, despite the prospect of the deepening slowdown in the world economy. In fact the only time Apple’s share price did begin to level-out was in January 2011, when reports in the press stated Jobs had been taken ill again; arguably a marked testament to the markets’ faith in their CEO.

The argument that technology will continue to develop and demand will never dwindle is true, but Apple has to be acknowledged for its innovative products – the recognition of which should go to Steve Jobs. When Jobs was reinstated at Apple in 1997, he inherited a company worth $2billion. Apple was trailing behind Dell and the world of electronics was wholly dominated by Microsoft. Today the company is worth $341.5bn.

As the Internet became more widely accessible, Job’s first priority was to rebrand Apple. The company reacted and introduced the pretty coloured iMac computers. Over the years, this evolution has continued, with the iMac leading to the iPod, then to the iPhone and most recently, to the iPad. In just 14 years Steve Jobs has changed consumer computing, the entire music industry, mobile communications and brought tablet devices to the market (a concept one might have thought belonged in an H G Wells novel not too long ago).

The upcoming autumn launch of iCloud is yet another example of the company and Steve Jobs’s innovation. Jobs spotted that the proliferation of hand held wireless devices has led to businessmen and consumers being ‘online’ all the time, and as a result, there is increased demand to access and backup data through cloud based services. iCloud will actually overservice these consumer needs; further differentiating Apple from competitors such as Microsoft and Dell, and in turn, increasingly encroaching upon Google’s territory.

As Dominc Rushe in the Guardian comments: “One of Jobs’s early goals was to surpass Dell”. Apple have done just that. In 2006 their market capitalisation was $72.13bn vs Dell’s $71.97, and by May 2010 Apple’s market cap was $3bn greater than Microsoft’s.  Now the technology giant’s market cap is rivalling oil companies. [1]

The soon to be launched iCloud service and the eagerly anticipated iPhone 5 will continue Apple’s dominance of consumer electronics under Jobs, with stores worldwide having flocks of dedicated followers queuing up overnight eager to get their hands on the latest Apple product.

When Steve Jobs decides to retire, the board at Apple has some task on their hands to replace him. It will not be easy.

Jamie Hooper

[1] Pg 24 Guardian 10 August 2011

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Monday, 1 August 2011

AIM joins in on Global IPO fever

A recent piece of research commissioned by Ernst & Young has offered all those associated with the financial markets reason to feel optimistic heading into the second half of the year. The report notes that Global IPO fundraising activity has risen by 38% in the second quarter of 2011, compared with the same period last year. Focusing on Europe in particular, the report comments that IPO fundraisers in the second quarter amassed to a huge 534% increase in capital raised, compared to the dealings from the first quarter of the year. Of particular note was the fact that dealings conducted on the London Stock Exchange were themselves responsible for US$12.6bn of the US$17.7bn raised within Europe’s stock markets. Whilst the blockbuster IPO fund-raiser of the Swiss commodities trader, Glencore, no doubt heavily contributed to this buoyant up-turn in capital-raising, further market sentiment would suggest that the London Stock Exchange is enjoying a very active period. In turn, the increase in Global IPO activity has also been heavily mirrored on the London Stock Exchange’s AIM market. The number of companies joining AIM has more than doubled to 16 in the second quarter of 2011, up from just seven in the first quarter. Furthermore, AIM has already completed 19 IPOs this year, with June in particular having been an especially strong month; the IPOs in June managed to raise £169.5m which was the highest amount raised on the market for six months. Market reporters suggest that the current trend of IPOs on AIM is set to continue throughout the second half of the year. Abchurch is certainly seeing an increase in activity and the team are working on a number of floats at the moment, one of which, Spectra Systems, a US specialist in advanced technology for banknote authentication floated on AIM in late July. Early indications suggest that Spectra Systems has continued the current IPO fund-raising trend on AIM by managing to raise £15m; a strong advance on the £5m initially hoped for. Furthermore, Spectra enjoyed a happy first day of dealings with the share price up to 78.5p having floated at 75.3p. .

Olly B

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