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DAILY BRIEFING

DAILY BRIEFING

South Korea's deadly (cultural) weapon

Written by Li-Ann Chin, associate
Edited by Tom Gillingham, associate partner

8 October 2021

Good morning,

Hundreds of desperate, cash-strapped contestants accept an invitation to compete in children’s games. A tempting prize of $38 million awaits, but with deadly high stakes. With a plot that seems to be a mishmash of The Hunger Games and Kill BillSquid Game Netflix’s newest South Korean series has taken the world by storm.
 
The thriller series has also proved popular with investors, who have snapped up shares of at least two companies that are connected, however tenuously, to Squid Game.
 
Shares of Bucket Studio, which holds a stake in the agency representing the show’s lead actor, soared by a whopping 107.08% in the past month. Distributor ShowBox, who had previously invested in Siren Pictures, the show’s privately-owned production firm, is up by 45%.
 
But this is no one-time occurrence.  
 
South Korean shares in the production company and distributor linked to Oscar-winning dark comedy Parasite surged in February, the month the film won the award. And Studio Dragon has been on an upward trajectory ever since its Hometown Cha-Cha-Cha series, which is ranked top seven on Netflix worldwide, debuted in August 2021.
 
Analysts have predicted that Korean movie and TV production stocks could outperform over the next 2-3 years on the back of global demand for the nation’s entertainment content. Netflix has already announced plans to invest an additional $500 million in South Korea this year, one of its fastest-growing markets.
 
Notably, South Korea’s global cultural clout hasn’t grown by way of creative serendipity; it was deliberately encouraged by the government as a source of the country’s soft power.
 
After the Asian financial crisis in the late 1990’s, the South Korean government, up to its eyeballs in debt, conceived of a macroeconomic policy to channel millions of dollars into its entertainment sector as a way to boost the economy. It all started with a report published in 1994 by the South Korean government council that suggested one blockbuster – the example used was Jurassic Park – could single-handedly equal the sales of over a million Korean-manufactured cars.
 
The plan has been over 20 years in the making but looks to now be starting to pay off. Literally.

News

Transport secretary Grant Shapps confirmed that, starting on Monday, the number of countries on the UK Covid travel list will be cut from 54 to seven, with South Africa, Brazil and Mexico set to come off the red list. Vaccinated travellers from Brazil, Hong Kong, India, Pakistan, South Africa and Turkey will also have their vaccination status certificates recognised, allowing them to bypass additional post-arrival testing requirements. The Scottish government said the changes were “agreed on a four-nation basis.” (£)
 
International travellers are set to be able to use lateral flow tests instead of costly PCR tests by half-term holiday in October which will make family trips abroad “much easier, much less expensive as well.” More information will be revealed in the coming days.
 
The National Energy Action warned that an additional 1.2 million to 1.5 million British households will be plunged into fuel poverty next spring as they struggle to afford to heat and power their homes. This warning was stated in response to energy regulator Ofgem’s prediction that the energy price cap is likely to have to rise again in April next year to reflect the increasing wholesale price of gas.
 
First minister Nicola Sturgeon was accused of trying to win Scottish independence by waiting for older Unionists to die off after she mentioned in a Financial Times interview that “demographics” indicate that delaying another referendum would increase her chances of victory. A series of polls have shown more than two-thirds of young Scots support independence, but pensioners overwhelmingly back remaining in the UK. (£)

Business and economy

In a powerful first step by a major asset manager, BlackRock pledged on Thursday to give its clients the power to vote directly at the annual meetings of companies it has invested in starting next year. BlackRock’s decision on proxy voting is expected to apply to nearly half of the $4.8tn of index equity assets it currently manages. (£)
 
Shared in written responses to questions from the UK Treasury committee, Huw Pill, the Bank of England’s new chief economist, warned that high levels of UK inflation could persist for longer than expected. His remarks have placed him on the hawkish side of the Monetary Policy Committee, suggesting that Pill could vote in favour of an early rise in interest rates. (£)
 
Russia is facing accusations of withholding gas from Europe as a political strategy, to hold Germany to ransom over the start-up of the new Nord Stream 2 pipeline. Siberia’s Cenomanian-Aptan gas field is the EU and Turkey’s largest natural gas source and the failure to send top-up supplies through the spot market has reportedly compounded a global crunch on gas supplies. (£)

Columns of note

A 2021 review by the CBI estimated that the UK economy suffers a £300bn output loss annually due to poor health. Why are investors and asset managers not more engaged on this? Jennifer Dixon, chief executive of The Health Foundation, points out in the Financial Times that many ethical or sustainability funds fail to include health-related exclusions on tobacco or alcohol. With this in mind, she points out that British American Tobacco was “oddly” awarded the third highest ESG rating in the FTSE 100 by data provider Refinitiv.
 
It was once unthinkable for a conservative cabinet minister to go on radio and accuse businesses of being “drunk” on cheap, migrant labour. And yet, that is exactly what justice secretary Dominic Raab did earlier this week. Larry Elliot writes in The Guardian that the conservative party’s newest formula – an amalgamation of an interventionist, left-of-centre approach to the economy and a tough right-of-centre approach to law and order, immigration and culture wars is one that leaves Labour in urgent need of a coherent plan of its own.  

Cartoon source: The New Yorker

Markets

What happened yesterday?

London stocks recovered above the 7,000 mark by the close on Thursday, as concerns over energy prices eased tentatively and a temporary deal on the US debt ceiling was achieved.
 
The FTSE 100 enjoyed a decent rally, ending the session up 1.17% at 7,078.04, while its more domestic-focused bedfellow was 0.77% firmer at 22,559.22.
 
Sterling was also stronger, last gaining 0.39% against the dollar at $1.3635 and trading 0.22% stronger on the euro to hit €1.18.
 
Wall Street stocks were also firmer at on the end of trading yesterday. The Dow Jones Industrial Average was up 0.98% at 34,754.94, the S&P 500 added 0.83% to 4,399.76, and the Nasdaq Composite rallied 1.05% at 14,654.02.
 
In company news:
 
Oil giant Saudi Aramco is rumoured to be considering an IPO for its retail fuels and lubricants business.
 
Professional services firm Deloitte is being investigated by the Institute of Chartered Accountants in England and Wales (ICAEW) for its audits of Essair Oil UK.

What’s happening today?

AGMs
Baker Steel

AGMs
(07:00) Current Account (GER)
(07:00) Balance of Trade (GER)
(13:30) Unemployment Rate (US)
(13:30) Non-Farm Payrolls (US)
(15:00) Wholesales Inventories (US)

Source: Financial Times

did you know

In 2000, Netflix’s co-founder, Reed Hastings, asked former Blockbuster CEO John Antioco if he would buy the company for $50 million. Antioco turned down the offer because the mail-based DVD rental business seemed too niche.

Parliamentary highlights

House of Commons

The House of Commons is in recess. The House will next sit on 18 October 2021.

House of Lords 

The House of Lord is in recess. The House will next sit on 11 October 2021.

Scottish parliament 

No business scheduled.

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