- Oil prices reach three-month highs amid escalating Middle East tensions.
- Defence and energy stocks among the biggest risers on the FTSE 100 in early trade.
- Investors largely shrug off repercussions of Evergrande’s Hong Kong liquidation.
- ‘Ask Jez’ for more detail about the ‘Tell Sid’ plan for the NatWest share sale.
- Store closures and jobs losses expected at Superdry as it mulls cost cuts.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The FTSE 100 has eked out small gains at the open with investors largely brushing off the latest twists in China’s Evergrande saga, while heightened tensions in the Middle east added to expectations of further defence spending. BAE Systems was the top riser in early trade, amid international concern about repercussions of the attacks on US troops stationed in Bahrain, by Houthi backed rebels, linked to Iran. Continued attacks on vessels in the Red Sea are also making traders more skittish, with another fuel tanker targeted. Amid the escalating violence, oil prices have reached three-month highs as supply concerns rear up. Brent crude has risen above $83 a barrel, which have helped energy giants, Shell and BP make large strides in early trade.
Evergrande, the property house of cards to liquidate in Hong Kong
Evergrande, China’s property ‘house of cards’ is a nudge closer to total collapse. A court in Hong Kong has ruled that a line has to be drawn given the high numbers of unfinished properties its repeated failure to pay interest on its debts and has ordered its liquidation in the special administrative region. While its operations in mainland China will continue for now, how Evergrande’s Hong Kong assets are frozen and sold off will be closely watched. It could act as a test to a bigger disposal of the property giant’s entire portfolio. Shares plummeted by 20% until their suspension, with investors losing any hope that there will be a way back from its web of troubles it is ensnared in. It’s again concentrating minds on China’s beleaguered property sector, which has dented wealth perceptions particularly among the middle classes and cast a cloud of consumer caution over the economy.
Ask Jez: the NatWest rumour mill swirls over June sale
Rumours are circulating that the NatWest share sale could begin as soon as the summer, enabling the government to offload the 36% stake in the bank it still owns.
The hope is that retail investors will be enthused about the opportunity to own shares in the bank, which was taken over by the government at the height of the financial crisis, and has been sold back to institutional investors, bit by bit. But there has still been no official clarification about the date or how the scheme will be run. ‘Ask Jez’, rather than ‘Tell Sid’ is more appropriate tagline for now.
It’s likely there will be more details laid out in the Budget on 6 March. Between 2008 and 2009, it cost the government £45.5 billion to bail out the then Royal Bank of Scotland. This was at an average of 520p per share, much higher than the current price. Back in November, the Chancellor said any sale would be subject to market conditions and achieving value for money. It’s hard to see how that will be achieved, particularly given that if you look at the shelved Lloyds plan. Speculation at the time was that people would have had the option to apply for between £250 and £10,000 worth of shares, and a discount of around 5% would then have been applied. It’s also still unclear what the share sale will mean for existing investors, and whether there may be another form of rights issue run alongside with a discount to reward holders.
Superdry’s soggy sales set to spark fresh cost-cutting drive
Something’s got to give at Superdry given the dramatic revenue slide. The company had blamed unseasonably warm weather, but it’s clear that it’s stuck in a difficult spot mid-market, where purse strings are being pulled tighter, and without the fresher looks to pull in younger crowds it’s a super hard slog. Faced with soggy sales, the company looks like it has little option but to undertake a big restructuring drive, and its confirmed it is looking into the feasibility of cost-savings options. There is no dressing up the challenge ahead, and staff at stores will be bracing for store closures and job losses, with fresh holes set to appear in high streets.”
