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Finance this week — Fintechs, ETFs and more…

Monday 12th July 2021 — Friday 16th July 2021

1. ETF inflows reach record highs

ETF inflows for 2021 have reached $488.5 billion. Traditionally, inflows in the second half of the year tend to be greater than the first half as shown in the graph below.

Source: Seeking Alpha

An ETF is a fund which tracks the performance of indexes such as the S&P 500 or FTSE 100. ETFs allow you to buy and sell the stocks on the index collectively rather than buying and selling each component individually. The top 3 funds which have seen the highest inflows this year have been Vanguard S&P 500 ETF, Vanguard Total Stock Market ETF and Blackrock’s iShares Core S&P 500 ETF.

During the pandemic, many people have been searching for a safe place to place their assets and with markets reaching all-time highs this year, ETFs have provided the perfect place to gain exposure to rallying markets in a time of great uncertainty.

2. Revolut becomes largest fintech in UK

Revolut has become the largest fintech firm in the UK, reaching a valuation of £24 billion through its latest round of fundraising. Revolut offers traditional banking services online mainly through their app. The firm raised $800 million after welcoming onboard two major global investors, SoftBank and Tiger Global Management.

The investment is likely to help them to continue innovating and expanding into different countries, namely India, a country in which the firm is keen to expand. CEO and founder, Nikolay Storonsky, said the endorsement shows “investors’ confidence that we can deliver products that raise the bar for customers’ expectations across the whole financial services industry”.

Revolut has a growing number of competitors in the online banking space, with its main competitor being Monzo. However, Monzo’s valuation of £1.2 billion is significantly lower than Revolut and Monzo lost 40% of its value in its latest fundraising last June.

Rishi Sunak, the Chancellor of the Exchequer also hailed the success of the firm. The UK government is looking to make sure the financial sector remains competitive since the UK’s departure from the EU. The vision has four key objectives: an open and global financial hub, a sector at the forefront of tech and innovation, a world-leader in green finance and a competitive marketplace promoting effective use of capital. Revolut’s expansion and ability to attract investors to the UK is likely to play a role in encouraging other fintech firms to set up in the UK.

3. Growth in China slows

China’s economy grew by 7.9% in the second quarter of 2021, just below analyst expectations of 8%. This was down from growth in the previous quarter of 18.3%. The IMF expects the economy to grow 8% for the year and then for growth to slow in 2022.

Last year, China was the only economy to rebound quickly after the pandemic. China’s economy shrank by 6.8% in last year’s first quarter, the worst performance since at least the mid-1960s. Activity started to recover in the second quarter, when the economy expanded by 3.2% over a year earlier. That accelerated to 4.9% in the third quarter and 6.5% in the final three months of the year.

How did China manage to revive its economy whilst others dwindled during the pandemic?

At the start of 2020, when the pandemic was beginning to take hold, China acted fast with strict measures to lock down cities. This is the first factor which contributed to the country’s growth during last year. Imposing restrictions quickly meant the government was able to control the virus more easily than other countries who delayed lockdown.

Other factors which have also contributed to the country’s strong recovery has been its global demand for Chinese goods which has helped significantly boosted their exports. This year exports have continued to grow. Exports rose 32.2% in June from a year earlier, compared with 27.9% growth in May.

4. Equities update

US equities slip as inflation jumps — Tuesday

The S&P 500 and the Nasdaq index both slid 0.4% as inflation rose by more than expected. US Bureau of Labor Statistics said June’s consumer prices rose 5.4% from a year ago, which was higher than expectations of 4.9%.

UK stocks rise ahead of ‘Freedom Day’ — Friday

The country is due to loosen most restrictions on Monday with all businesses due to be allowed to open and masks and social distancing no longer being mandatory. This led to an uptick in the FTSE 100 as it increased confidence that this easing would allow the economy to bounce back stronger. The FTSE 100 rose 0.34%, but finished the day 0.19% lower.

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