28-02-2018

The Bank of England left its policy unchanged by keeping interest rates at 0.5% and maintain its quantitative easing stimulus at the BoE February meeting. At the same time, the central bank lifted its 2018 UK GDP growth forecast to 1.8% from 1.6% foreseen at the November inflation report. The recovery in global and regional economic activities is positive to UK economic growth and in particular, the increase in UK trade surplus in 2017 has contributed a lot to UK’s growth. The BoE Deputy Governor, David Ramsden, argued that interest rates might have to rise faster than previously thought, while investors see the probability of a BoE rate hike in May to more than 50 percent. In fact, the strengthening UK economy and the prospect of rate hike have already been reflected on the strong sterling. The GBP/HKD has upped 13% since the beginning of 2017, and it is expected companies with business exposure in British could benefit from sterling appreciation. In particular, Power Assets Holdings Limited (0006) is a global investor in energy and utility-related businesses with investments in electricity generation, transmission and distribution, and renewable energy. Over the years, Power Assets has adopted a strategic approach to seek growth in international markets, through investments and M&A in foreign assets. Revenue from its UK business has accounted for more than 40% of the total income of Power Assets, its earnings and dividend yield could further increase amid UK economic recovery and sterling appreciation.

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