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04 Jul 2016

How to Make Money on Brexit Currency Exchange

Given the fact that the pound plummeted to historic levels immediately following Brexit, it may come as some surprise to learn that Currency Exchange dealers were inundated with clients requesting to buy large sums of pounds.

On the other hand, if you’re an investor who understands the laws of supply and demand, perhaps you understand why people like billionaire investor Wilbur Ross, chairman of WL Ross & Co. saw the weakened pound as an opportunity to profit. “I bought some pounds on Friday,” Ross said, as news of the referendum result was just breaking. Like other investors, he’ll also be waiting to see if pound sterling sinks lower-as is anticipated by many analysts who think that the coming six months will see an even lower pound exchange rate.

According to our calculator, today’s rate is already a remarkable $1.32, but analysts who are predicted the UK will soon be in an economic recession expect the pound to fall lower, making it a bargain currency for those who can afford to wait for it to recover value. Ultimately, investors know that these are cyclical events, even as Brexit is a one-off historical anomaly.

 Currency Exchange Rates Spur Chinese Shoppers

“The concerns fueled by the Brexit have sparked a sweeping bargain-hunt frenzy among Chinese consumers, although that may only be short-lived,” said Zhu Qiucheng, an analyst with China Ecommerce Research Centre (CERC).

According to the CERC, Chinese shoppers spent 183.3 billion yuan on British goods purchased online last year. So popular are British brands, they accounted for about one fifth of all of China’s e-commerce transactions in 2015. Now the plummeting pound has set off spending sprees for Burberry coats, Hermes handbags and Hugo Boss scarves.

Brexit Bargains Make Headlines in Chinese Newspapers

Chinese newspapers, like the Wuhan Morning Post have featured articles titled “Pound’s depreciation sparks shopping fever.” This has only added to Chinese consumer’s celebratory outlook on Brexit. The paper pointed out the savings, saying: “A classic Burberry trench coat, for example would have cost you 13,757 yuan before. But on the day of Brexit you could find one for just 12,203 yuan.”  At today’s rate is 1 GBP exchanges for 8.80397 Chinese Yuan Renminbi, a rate which will do nothing to dampen the online shopping spree.

“Britain’s exit has caused a devaluation in the pound which means that the same amount of yuan allows you to buy more,” the Wuhan Morning Post said.

The South China Morning Post reported similar stories, quoting the co-founder and CEO of NoFashion.cn, a leading Chinese fashion industry news portal: “Consumers passionate about buying luxury products always react swiftly to any sharp change in the value of foreign currencies,” said Xiaotang Tang, “As the Brexit became the talk of the town, both shoppers and sellers were trying their best to benefit from it.”

Expect More Chinese Holiday Makers and Students

More than 200,000 Chinese tourists visited Britain last year, many popping into iconic Harrods during the store’s annual summer sale. This year the China Youth Daily newspaper has reported that Ctrip, China’s leading online travel agency, has seen an increase of 200% in searches for British holidays on its booking app.

According to statistics by UK Cisa, the UK council for international student affairs, 89,540 Chinese students attended UK schools and universities in 2015. Those enrolled in the upcoming semester will save a generous amount when paying tuition fees. For these overseas students, the poor pound exchange rate is happy news.

In the short term, the increased purchases of British brands and increase in holiday travel will be a welcome boost to the UK economy. Brexit sales will see companies like Burberry Investors purchasing bargain rate pounds will be able to cash in on the bargain currency, too-proving that it is possible for billionaire investors, retailers, travel companies and shoppers to make money on Brexit currency exchange rate.