Business View: Viva Aviva: a stock market saviour emerges in the East (Anglia)

Click to follow
The Independent Online

This is the time of year when some of Britain's wealthiest people head to Norfolk. The windswept coast between King's Lynn and Cromer is so popular with the monied classes that it has been nicknamed "Chelsea-by-Sea".

This is the time of year when some of Britain's wealthiest people head to Norfolk. The windswept coast between King's Lynn and Cromer is so popular with the monied classes that it has been nicknamed "Chelsea-by-Sea".

Many City brokers and fund managers will probably have sent their families up to the seaside cottage ahead of them, staying back to trade through the late July and early August reporting season while watching England get hammered in the Test Match. Despite the cricket, when they finally set off at the end of this week, they will probably be in a decent frame of mind.

This has been a pretty good results season, or at least a "not as bad as we'd feared" season. The Pru's dividend cut was even better trailed than the new series of Pop Idol, the Lloyds TSB lack of dividend cut was a relief, and the ICI recovery plan won the sort of approval that the old chemicals warhorse has not enjoyed since the days of John Harvey-Jones. However, one announcement might give the City folk an extra fillip before they go. Indeed, it may have them making sure that they travel to the holiday home through Norwich just to say thank you. It was the optimistic noises emitted by Aviva, the curiously named insurer which is better known by its main brand, Norwich Union.

Aviva was brave enough to draw a line in the sand and say that the three-year-long bear market was over. Equities were on the rise. Its funds are buyers of good old shares and everyone else, it reckons, should get on the bandwagon before it starts speeding away from them. You could argue that this is Aviva talking its own book. If it goes heavily into equities and everyone else runs away, it will suffer.

But the fact is, the vast majority of investors are waiting for a sign to get into the market. Interest rates are so low that keeping cash on deposit is painful, bonds are shaky for fear of rates going up, and property looks damn expensive. Companies need an equity rally to relieve the pension fund headaches that are threatening profits, and the Government needs a bit of positive activity to bring in some tax revenues to pay for things like the Iraq war and the infrastructure building programme. And despite supposedly being the healthiest major economy in Europe, our stock market has underperformed every other leading market in the world this year.

Whether Aviva has called the bottom of the market depends a lot on faith. Positive sentiment creates a virtuous circle. Or to put it more crudely, the City's so- called experts are really a bunch of sheep who need a leader to follow. This leader may well hail from Norfolk.

Ending the six-week spin cycle

It had started to get silly. Unilever had taken the Financial Services Authority's concept of reporting financial information to its logical conclusion. Combining it with the quarterly reporting that most international companies do these days, this meant that you'd have a pre-close statement just before the end of each quarter, then quarterly figures, followed by another pre-close statement and then some more quarterly figures, so that Unilever was reporting to the market every six weeks.

This not only led to terrible volatility in Unilever shares - as traders tried to make up for the lack of excitement elsewhere by generating some in the soap, shampoo and ice cream giant - but also it was so out of sync with the way Unilever is run. The "Path To Growth" plan of chairman Niall Fitzgerald is a long- term strategy, not expected to be completed until the end of 2004. Trying to judge it every six weeks, therefore, was getting silly.

Unilever is now dropping the guidance and is trusting that the stock market will lose its fixation with the Atkins diet and its effect on SlimFast, and allow the shares to regain their premium rating.

What many might have missed is that Unilever's debt is now down to €16bn (£11bn). Mr Fitzgerald said, after the acquisition of American rival Bestfoods, that he wanted debt to be in the €12bn to €15bn range before he considered any more takeovers.

Now he is claiming there are no real holes in his portfolio. But watch out. Acquisitions are an opportunistic business, and it is amazing how, when something tasty becomes available, you find a slot to put it in.

j.nisse@independent.co.uk

Comments