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Asian investors bargain hunting in Britain

HONG KONG -- In the week since Britain's historic decision to leave the European Union shocked financial markets across the globe, investors in mainland China and Hong Kong have already begun trying to make the best of the rare investment opportunity.

Unlike European, U.S. and Japanese markets heavily hit in the turmoil following the Brexit decision, trading in the rest of Asia appears to have calmed down.  

On June 23, the day the national referendum took place, Hong Kong-listed Magnificent Hotel Investments concluded an agreement to buy the Travelodge Royal Scot Hotel, located near King's Cross Station in central London, for 70.3 million pounds ($93.4 million). It was perhaps the quickest acquisition of a British property leveraging the Brexit effect.  

The next day, the sterling plunged to a 31-year low against the dollar. The Hong Kong dollar, which generally moves with the U.S. dollar, strengthened against the pound. To the delight of the Hong Kong company, 10% was knocked off the purchase price overnight. The buyout was announced on June 27. 

The action is not limited to large companies. Individual investors in China are keen to take advantage of this once-in-a-lifetime opportunity, too. According to newspaper reports in Hong Kong, wealthy locals and mainlanders rushed to apply for the purchase of three apartment houses in London on the Saturday after the vote. 

Don't let a crisis go to waste

Guo Guangchang, co-founder and chairman of Chinese conglomerate Fosun Group, recently told Reuters, "Market volatility and panic will probably bring better investment opportunities." He said he would increasingly look for deals in Europe, particularly in the U.K.

His strategy to make the most of upheaval is a reminder of how Warren Buffett, the legendary American investor, reacted in the wake of the collapse of Lehman Brothers in 2008 and the subsequent global financial crisis. Guo is often referred to as the Chinese Buffett. 

In the stock markets as well, Chinese investors are scouring for companies that could benefit from Brexit. On the Shenzhen Stock Exchange, shares of Beijing Utour International Travel Service, Hna-caissa Travel Group and Shenzhen Tempus Global Business Service Holdings have trended upward since the exit decision was made.  

While acknowledging the possible negative influence that Britain's referendum could have on consumer sentiment across the globe, a report from HSBC Global Research released on June 24 suggested that it may not be a disaster for many of Europe's high-end brands. Weaker sterling and euro may encourage foreign shoppers to splurge on European luxury goods. 

The report highlighted specific brand names, including London-listed Burberry Group and Jimmy Choo, as examples that will likely enjoy the positive side of the Brexit impact. These companies rely on sales to Chinese and Hong Kong consumers, while their manpower and other costs are determined based on the pound.

Brexit could eventually hurt real economies in Europe, as well as the confidence of Asian market players. For now, however, shrewd and aggressive Chinese investors appear to be dominant in the market.

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