Market Report: Asset manager fears prove groundless
Tuesday 05 February 2013
Some investors feared that a shake-up in the way we save and invest could hit asset managers where it hurts: fees. Scribblers at Citi were so concerned last year that they rated Hargreaves Lansdown a sell. But these fears were allayed when Barclays' analysts broadcast their enthusiasm.
Punters feared that profitable asset managers would be few and far between after the abolition of commission, thanks to the introduction of the Retail Distribution Review (RDR) at the start of this year. They thought the impact would be so severe on firms like Bristol-based Hargreaves that it would be better to sell out. But six weeks into life with RDR and asset managers are still breathing. In fact, with the stock market making a recovery, the share price of asset managers could be benefiting from canny investors who spotted that they do well when equities are in favour.
Barclays called on punters to buy shares in Hargreaves in this "post-RDR world" and upped their share price target to 820p from 800p. The shares responded with a 40p gain to 734.5p – top of the tree on the benchmark index.
Meanwhile Aberdeen Asset Management, which Barclays thinks has "superior revenue trends", added 6.2p to 407.3p.
For mid-cap index Jupiter, the big problems are "key man risk and declining revenue margin", but Barclays thinks its "strong management team is negotiating these challenges well" and it put on 8.1p to 337.7p.
Hargreaves was closely followed at the top of the blue-chip index by the Kazakh miner Eurasian Natural Resources Corporation. The group has been surrounded by bid speculation for the past few months and idle traders thought another suitor could be ready to make its intentions known and the shares lifted 14.9p to 344.2p.
The oil explorer Afren has been in focus after numerous reports that it is selling its Kurdistan and east African assets. A variety of bidders have been mooted, including China's Sinopec and the US giant Exxon. One trader even thought a bid could still come in for the entire company at about 220p a share. The shares were off 3.2p to 152.9p.
The oil and gas specialist BG Group was also getting attention after its fourth-quarter update. Investec Securities analysts warn that it is still time to sell the shares despite the update being in line with expectations. BG lowered guidance on 2013 production and liquid gas profits, and Investec has placed its forecasts under review. It gives the shares a sell with a 1,000p share price target. But investors thought the stock still looked cheap, and it added 38p to 1,142p on the top flight index.
A big sell-off on Monday – generated by profit takers – did not continue as investors brushed off eurozone concerns. The FTSE 100 index added 35.92 points to 6,282.76 – but not enough to recover from the previous day's 100-plus point loss.
Italy wanted a word with London – Italian financial regulators are reported to have asked the Financial Services Authority to investigate a sale of shares in Europe's biggest oil services company Saipem before a profit warning last week. Italy's Consob is said to have asked the FSA to look into the timing of the sale and who sold the shares. Saipem's shares lost more than a third after the profit warning last week.
Liberum Capital's Charlie Campbell was keen on housebuilders, and despite a share price rally Barratt's exposure to the lucrative London and the South-east housing markets make it worth buying, Mr Campbell said. He gave it a 259p share price target, and the shares built up a 2.4p gain to 219.9p.
The materials group Low & Bonar, which made the materials for the O2 Arena roof at Greenwich, was hit by a slowdown in demand for artificial grass, and pre-tax profits fell to £6.1m. But it increased its full-year dividend by 14 per cent, and the shares produced a 4.25p gain to 61.75p.
One share transaction got brokers chatting about London Capital Group. A notification that 1.4 million shares in the owner of Capital Spreads had changed hands prompted the market to question who may have sold out of the spread betting firm, but informed sources nixed talk of director's deals. The shares edged up 0.25p to 34.25p.
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