Brewin dolphin sinks as commissions drop
Shares in Brewin Dolphin (BRW:LON) sank 10% today after it reported profits of £37.9m in the half year to March 2015 compared to £22m in the same period a year ago.
Despite the rise in profits investors dumped their shares as future margin pressure came into question.
“We believe that lower revenue margins will persist for the following reasons: lower commissions; competition caused by increased transparency; use of third parties in securing flows, including lower margin agent business; an increase in average client size that results in an overall lower fee level per unit of FUM; and greater efficiency in managing portfolios (less turnover and thus less commission) said analysts at RBC
Brewin Dolphin are at the higher end of the scale when it comes to dealing rates and fees charged, increased competition has led to some clients voting with their feet and seeking cheaper costs or a superior service elsewhere
Commissions charged by Brewin Dolphin fell 17% to £40.1m.
Brewin Dolphin made efforts to stream line the business by disposing of Stocktrade, there execution only service. The sale recorded a gain of £1m.
Shares in Brewin Dolphin finished the day down 10.71% at 315.1p.
Chinese funds to consider as stocks soar
The Chinese stock market has rallied again and its leading index in Hong Kong hit another 7 year high. Private investors in China are shifting their money out of property into stocks, and those that don’t feel satisfied with the amount they have invested into shares are borrowing to boost their exposure.
Some have asked if the latest rally in Chinese markets is a bubble. It may well be, but the question is when will it burst? Given Chinese accommodative monetary policy, it doesn’t seem like it will any time soon. The Chinese authorities are determined to stimulate the economy to meet their 7% growth target and their strategy this far has been to cut interest rates and implement huge infrastructure projects.
One could argue that the impact on the real economy is yet to take hold but central bank easing has definitely had an impression on Chinese equity investors.
The Shanghai composite has more than doubled over the last year. The domestic Chinese stock market is a highly regulated market in which individual shares are only easily available to domestic Chinese investors and foreign institutions.
Those investors who have been able to do so have been buying Chinese stocks expecting further gains driven by continued stimulus and the eventual pickup in the Chinese economy.
For those that feel that they have missed the boat, I would point towards Hong Kong’s Hang Seng index that doubled 2003-2006 and then rose over 90% in 18 months.
If the current Chinese rally shapes up to be at all similar to the rally in the 2000’s investors may do well to consider broad based exposure through a selection of funds.
Fund Ideas:
Fidelity China Special Situations
Better late than never. Anthony Bolton famously came out of retirement to establish this China focussed Investment Trust that set about benefitting from the rise of the Chinese consumer. He was 5 years too early but this fund has now been reborn and has a diverse exposure to Chinese large caps.
iShares MSCI China ETF (NYSE:MCHI)
This Exchange Traded Fund (ETF) provides targeted access to 85% on the Chinese stock market and encompasses some of the fast growing medium sized companies. The ETF is listed in the US and denominated in US Dollar so an investment in this ETF also comes with currency fluctuations. Given the potential of an US interest rate hike and Dollar strength it may prove beneficial to those investors based in the UK.
Oil rises on robust asian demand
Brent crude rallied on Monday as Japan and China showed signs of healthy demand. The Japanese Finance ministry has said their imports rose 9.1% in April from a year ago and China imported a record 7.32 million barrels in April as healthy car sales increased demand.
Tension in the Middle East has also given traders reason to push prices higher. Having quickly taken the city of Ramadi 60 miles west of Baghdad, ISIS have set the Baiji refinery ablaze in an effort to deter oncoming Iraqi forces.
The refinery was captured last year and the inferno is unlikely to have any major impact on global supply but it highlights the willingness of ISIS to sabotage oil assets if they are forced into retreat.
Brent crude hit low in January but has since made a steady move higher as investors bet on higher prices in the second half of the year.
European shares end in negative territory on Greece and Spain worries
European shares ended in the red as Greece sails towards a possible default. Investors were unnerved by comments from the Greek government that suggested they may not be able to make repayments to the IMF in early June.
London and Frankfurt were closed but markets in Italy, France, Spain and Greece remained open and headed south in thin trade. The US was also closed so the full impact of recent Greek comments may not be seen until Tuesday’s trading.
The results of Spanish local elections also sapped optimism after the ruling party suffered heavy losses. Mariano Rajoy bore the brunt of voter’s discontent after years of spending cuts and high unemployment.
“There is no doubting that Greece has become a frequent recurring risk to investor sentiment in recent months, and there is potential for investor sentiment to be pulled down even further by the news that anti-austerity parties were declared victorious in several local elections in Spain,” said Jameel Ahmad, analyst at FXTM.
Greek Interior Minister says Greece has run out of money
The Greek interior minister Nikos Voutsis has today said what most economist have feared for a long time now, Greece will be unable to pay money due to The IMF in June.
Mr Voutsis said Greece simply does not have the money to hand over.
The announcement has come after weeks of fruitless discussions between Greece and the IMF, EU and ECB over how Greece is going to service its EUR320 billion debt mountain. Many, including some from within the Greek government say Greece will never be able to repay creditors.
Greece is due to repay 4 instalments of EUR 1.6billion to the IMF throughout June, the first being on 5th June.
The latest development brings a potential ‘Grexit’ closer and increases the probability of significant market turbulence in the coming weeks.
“It would be a disaster for everyone involved,” said Greek finance minister Mr Varoufakis
Top Ten Investing Mistakes
- Lack of a strategy
- Not cutting Loses