Market Report: StanChart off-key as activist goes short
Tuesday 14 May 2013
Investors in Standard Chartered were singing the blues yesterday. The Asia-focused banking group's share price fell to the bottom of the pile after punters caught wind that the activist investor Muddy Waters was shorting the stock. Carson Block, founder of Muddy Waters, a US short-seller, said at a hedge fund conference in Las Vegas that he had bought five-year credit default swaps on Standard Chartered. He is betting against the group because of its "deteriorating" loan quality.
At the lecture, entitled "Investment Showcase: Best Ideas for the Year Ahead", after the markets had closed in the UK on Friday, Mr Block said the risks in Standard Chartered's loan book are being underestimated. He acknowledged that it has diversified across many emerging markets, but he is worried about the bank's exposure to a slowdown in China, which could lead to "considerable stress".
StanChart slumped 30.5p to 1,552.5p.
There was still no stopping the FTSE 100 index. It took a breather during morning trade but, even after seven days of gains, it recovered during the afternoon, and added 6.78 points – to close at a fresh five-and-a-half-year high of 6,631.76. The last time it was above this level was in October 2007.
The biggest riser on the blue-chip table was the security group G4S. The previously scandal-hit Olympic security group last week fell more than 20 per cent since its peak this year following disappointing first-quarter results. Yesterday it recovered some of these losses – up 8.4p to 256.1p – as traders caught up with news last week that it had won the contract to protect the G8 summit in Northern Ireland next month.
Joining Standard Chartered in the doldrums was the part-nationalised lender Lloyds Banking Group after it revealed that its chairman, Sir Win Bischoff, said he will retire no later than next year's annual meeting. It dipped 0.85p to 58.09p.
Scribblers at JP Morgan rate the miner Vedanta Resources overweight, with a 1,500p price target, because they think the benefits of its "impending restructuring are not fully priced into the shares", but the market disagreed yesterday, and Vedanta declined 19p to 1,280p.
The founders of Kazakh mining group ENRC are said to have asked for a delay to the 17 May bid deadline to buy out the London-listed company. Co-founders Alexander Machkevitch, Alijan Ibragimov and Patokh Chodiev, with the support of major shareholder the Kazakh government, are expected to ask for extra time to make their potential bid for the miner, which is facing a Serious Fraud Office investigation. It edged back 0.4p to 293.5p.
On the mid table, the South African platinum miner Lonmin said it more than trebled profits to $54m (£35.1m) in the six months to April, and its shares advanced 7.2p to 286p.
The online betting group Betfair slipped 3p to 895p after reports in the weekend press that a consortium led by CVC Capital Partners is poised to return with a better offer, after its initial £912m takeover approach last month was rejected. After the markets closed, the Takeover Panel said it had given CVC until today to bid.
The online grocer Ocado, down 14.6p to 210p, was hit by concerns about what its potential distribution partnership with Morrisons will mean for its agreement with rival Waitrose.
Investors in Flybe have had to contend with a string of profit warnings, but news yesterday that it could sell its Gatwick airport slots sent the shares soaring.
Flybe announced that it is in discussion to sell take-off and landing slots at Gatwick. The City welcomed the plan, which should help it to repair its balance sheet. The airline has issued five profit warnings since it listed in 2010 at 295p a pop, and has embarked on a turnaround plan involving £35m of cuts.
Flybe owns about 6 per cent of Gatwick's slots. Selling off some or all of these – to operators that may include easyJet, British Airways or Norwegian – could bring in, according to Liberum Capital's estimates, as much as £12.5m. The shares soared 7.5p to 58.87p.
The Aim-listed software company Quindell Portfolio tried to soothe investors after the company was hit by concerns about an equity swap to fund an acquisition earlier this month. It said it "has a strong balance sheet, good debtor controls and continues to trade profitably", and investors appeared happier – the shares recovered 1.1p to 7.1p.
Angle, the medical technology group, gave a positive update on its Parsortix non-invasive cancer diagnostic product and was 9p better off at 54p. Skyepharma said its lung drug got approval from the US Food and Drug Administration, and closed 2p stronger at 45.5p.
Snap up shares in Blinkx, Peel Hunt urges. The broker is cheered by yesterday's final numbers from the video advertising business and praises management for "delivering impressive growth". It adds that shares in the firm are "an exciting way into a high-growth market". They are 115p and the target (previously 103p) is under review.
Reduce your stake in HSBC, Investec advises. The broker is "perfectly comfortable" with the bank's first-quarter with "improving cost performance" offsetting weak revenues but feels that recent outperformance gives limited upside. Its shares are 739.6p with a 735p target.
Hold: PROVIDENT FINANCIAL
Hang on to shares in Provident Financial, Canaccord Genuity recommends. The broker says the doorstep lender's first-quarter numbers last week were "disappointing" with a drop in borrowers. However, Provident's Vanquis credit card reported customer numbers up 30 per cent year on year. The shares are 1,559p with a 1,400p target.
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