CFA Institute members say equities correction likely in next one to three years

Liam Roche
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CFA Institute members say equities correction likely in next one to three years

Plurality argue equities have been out of sync with the real economy since the start of the pandemic

The CFA Institute, the global association of investment professionals, surveyed its membership to analyse the impact of the coronavirus pandemic, and found that many respondents are expecting market corrections within the next one to three years.

The results showed that 45% of those surveyed thought this to be true, believing that equities in their respective markets have recovered too quickly.

The proportion of respondents who believe that equities are fairly valued was low across the board.

50% of respondents in North America are concerned about a correction, compared to 40% of Europeans, while respondents in emerging markets appear more optimistic that equities in their own market.

Double-digit declines have occurred in the S&P 500 every 1.87 years since 1950, therefore stock market crashes are more common than it may seem.

While the US stock market has been showing some signs of weakness with the Nasdaq trading lower for three weeks in a row last month. This is also raising concerns on Wall Street that a crash could be on the way.

Big tech companies reached new highs since the pandemic and many analysts argue that the markets are due for a correction as the economy recovers thanks to a fall in Covid-19 cases.

However, with a somewhat contrary view, a majority of analysts polled by Reuters believe that a near-term correction is unlikely.

Reuters polls of nearly 300 equity strategists taken across May showed all 17 stock indexes surveyed on were forecast to rise, with yearly gains in nearly all of them predicted to be in double digits in 2021.

“When it comes to assessing the market environment we prefer to choose ‘half full’. We will remain vigilant for rebalancing opportunities … as we expect rates and equities to drift higher,” noted Ehiwario Efeyini, senior market strategy analyst at Bank of America.

“In terms of the broader economic environment, we are closer to mid-cycle than late cycle and that growth is currently flashing bright green and surprising more than expected.”

“It is interesting to see the survey results telling us that respondents believe that equities have recovered too quickly, as it could show that CFA Institute members believe there is a disconnect between economic growth fundamentals and capital markets caused in part by monetary stimulus, which could be corrected in a not-too-distant future of less than three years,” said Paul Andrews, Managing Director of Research, Advocacy and Standards at CFA Institute. 

 “To me, it also indicates to authorities that monetary stimulus is not a simple or linear lever to pull given the complexity of the economic and financial ecosystem; there will be unintended consequences to consider in the future.”

Analysts see this UK housebuilder’s profit rising 20% in 2021

UK Investor Magazine
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Analysts see this UK housebuilder’s profit rising 20% in 2021

The latest release from Nationwide recorded a 10.9% increase in property prices in the year to March, the fastest rate in around seven years.
The boom in the UK housing market was helped by tax incentives offered by the UK government, as well as a broad 'race for space' observed in buyers scrambling to upsize to rural properties "with people reassessing their needs in the wake of the pandemic," outlined by Nationwide's chief economist Robert Gardner in the report.
Given the jump in activity, it's likely interest in housebuilding shares increases and analysts have highlighted one UK housebuilde...

The commodities supercycle and mining royalties with Trident Royalties

UK Investor Magazine
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The commodities supercycle and mining royalties with Trident Royalties

Trident Royalties presented at the May UK Investor Magazine Virtual Conference and delivered a truly fascinated Q&A session covering the commodities supercycle and the composition of their mining royalty portfolio.

CEO Adam Davidson gave his views on the possibilities of a commodities supercycle and outlines the market pressures driving commodity prices.

Adam Davidson also discusses why Trident Royalties wanted to make Lithium a central part of their portfolio of royalties, given the increasing demand for electric batteries.

The full video presentation is available in the video section of the UK Investor Magazine website.

Gold retreats after reaching five-month high

Liam Roche
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Gold retreats after reaching five-month high

Spot gold may rise into $1,932-$1,953/oz range according to technical analysis

Gold is toying with a five-month high ahead of European and US data set to be revealed this week that could provide insight into the health of the world economy.

Gold retreated from its five-month high of $1,917 to just below $1,910.

The recent move down comes as the decline in the US dollar halted and a rally in the Treasury yields made up some ground.

While inflationary pressures remain on the horizon it appears the sentiment around the precious metal is still bullish.

US consumer prices jumped in April, easily surpassing the Fed’s 2% target, recording its largest annual gain since 1992.

“Gold prices are riding a very strong upward trend … this is against the backdrop of a falling U.S. dollar and also inflation concerns,” said Margaret Yang, a strategist at DailyFX.

“Perhaps another fundamental factor behind gold is the return of Chinese and Indian buyers. In the near-term, if gold can breach the $1,922 per ounce mark, it can open the room for further upside potential.”

Investors will be focusing on key US economic figures, including non-farm payrolls data due on Friday.

The Fed continues to reassert its view that the figures show a short-term trend, including the stimulus packages and supply-chain bottlenecks.

Spot gold may rise into $1,932-$1,953/oz range according to technical analysis by Margaret Yang.

Oakley Capital unveils investment in ICP Education

Liam Roche
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Oakley Capital unveils investment in ICP Education

Oakley Capital Investments’ liquid resources available for deployment estimated to be £180m

Oakley Capital announced on Tuesday that the Oakley Capital IV has agreed to invest in ICP Education Holding, a leading independent group of UK nurseries.

Oakley Capital Investment (OCI) is a listed investment trust that invests in the funds managed by Oakley Capital. Its indirect contribution via Fund IV will be £27m, while its liquid resources available for future deployment (including this transaction) are estimated to be £180m.

ICP Education is one of the largest nursery operators in the UK, serving nearly 6,000 children at 44 nurseries across England, predominantly in London and the South East.

“The group is one of the highest quality large nursery operators in England, with a third of nurseries rated Ofsted Outstanding and 98% rated Outstanding or Good,” Oakley Capital said in a statement.

In addition, last year ICP was ranked as the 14th Best Place to Work in the UK by Glassdoor, across all categories.

ICP Education has achieved a strong track record of growth since its foundation. Enrolments were negatively impacted through UK COVID-19 lockdowns, however the business has quickly recovered to pre-COVID occupancy levels in recent months.

Stephen Booty, Executive Chair of ICP Education, commented: “We are very much looking forward to our partnership with Oakley, given their depth of experience as investors in Education. The team has a real appreciation of how important it is to be focused on providing the highest standards of quality care and early years education, and we are looking forward to working with them to realise our growth ambitions in the UK and internationally.”

Oakley is one of the most active investors in the European education sector. To date, platform investments in the sector have included Inspired Education, a leading global schools group; Schülerhilfe, Europe’s largest tutoring group; IU Group (formerly Career Partner Group), the largest and fastest growing university in Germany; ACE Education, a leading French university group; and Ocean Technologies Group, the leading provider of e-learning to the maritime industry. 

Peter Dubens, Managing Partner of Oakley Capital, commented: “Our experience investing in high-quality businesses within the Education sector has led us to identify the nursery sector as an attractive area which is enjoying sustained growth. We look forward to partnering with Stephen, Dominic and Clare, as they continue to grow one of the leading premium nursery groups in Europe.”

FTSE 100 off to sunny start in June despite Covid concerns

Liam Roche
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FTSE 100 off to sunny start in June despite Covid concerns

The FTSE 100 is shining in the sun on the opening day of June, putting aside concerns over the spread of the ‘Indian’ variant, and its potential impact on the end of lockdown later this month.

A couple of hours into the trading day, the index is up by 1.22%, “benefitting from a strong performance from its miners and, after news of surging house prices thanks to the stamp duty holiday rush, some nice gains from the likes of Barratt Developments and Persimmon,” said Connor Campbell financial analyst at Spreadex.

The FTSE 100 is now trading at 7,108.43. If it finishes the day at that price it will be the index’s best close to a day in over two weeks.

“However, it spiked above 7,050 multiple times in the final week or so of May, but was unable to build any sense of momentum, wilting at the closing bell each day. If it can avoid the same fate this afternoon, the FTSE 100 could find itself turning a corner,” Campbell said.

The DAX was even stronger this Tuesday, rising 160 points – or 1.1% – to sit withing 20 points of 15,600. The German bourse only needs to squeeze a bit more juice out of investors to re-hit the all-time highs struck last week.

The CAC was also riding high, its near half a percent increase pushing it to a recent peak a fraction below 6,480.

Against a backdrop of the lowest covid rates in a year in the States, the Dow Jones is set to return from Memorial Day with a 200-point-plus increase, one that would leave it at its best price since May 11th, and only 320 points from its 36,000 all-time high.

FTSE 100 Top Movers

Rio Tinto (4.38%), Anglo American (4.35%) and M&G (3.91%) each saw impressive gains on the FTSE 100 early on Tuesday.

At the time of writing only five companies are in the red. The three FTSE 100 companies seeing the biggest falls in value are HSBC (-0.73%), Burberry (-0.51%) and London Stock Exchange Group (-0.28%).

UK house prices up by 10.9% and there could be more to come

Liam Roche
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UK house prices up by 10.9% and there could be more to come

Shifting housing preferences are ‘continuing to drive activity’

UK house prices rose by an annual 10.9%, the biggest jump in nearly seven years.

The rate could increase more rapidly as people seek new homes in the aftermath of the pandemic, according to Nationwide.

Nearly 70% of homeowners weighing up a move said they would go ahead even without the extension of tax incentives from the UK government. This is according to a survey organised by Nationwide at the end of April.

Shifting housing preferences were “continuing to drive activity, with people reassessing their needs in the wake of the pandemic,” Nationwide’s chief economist Robert Gardner said.

The numbers released on Tuesday by Nationwide are the most recent showing the extent of the rise in house prices, as they hit a record high at an average of £242,832.

A risk remains that demand surpasses supply, which could create a risk of inflationary pressure said Bank of England Deputy Governor Dave Ramsden.

“We are looking carefully at the housing market and a raft of real-term indicators,” Ramsden told the Guardian.

Nationwide said that the average house price was 1.8% higher in May than the month before.

According to a Reuters poll of economists, prices were expected to increase by 9.2% in yearly terms and by 0.8% from April.

Following the first lockdown, housing transactions collapsed to a record low of 42,000 in April 2020.

By March 2021, activity reached a record high of 183,000 as activity soared at the backend of 2020 and into the new year.

There has been a complete turnaround in price since the pandemic began according to Nationwide’s chief economist Robert Gardener.

“Amongst homeowners surveyed at the end of April that were either moving home or considering a move, more than two thirds said this would have been the case even if the stamp duty holiday had not been extended,” Gardner said.

“It is shifting housing preferences which is continuing to drive activity, with people reassessing their needs in the wake of the pandemic.”

Sam Mitchell, CEO of online estate agent Strike, said: “Contrary to the British weather, the UK property market was red-hot in May and house prices showed no signs of cooling.

“The fast approaching stamp duty holiday deadline has helped turn the market into a frenzy, but there are other factors at play here. A sense of normality is returning as restrictions lift and the vaccination roll out progresses, while we’ve also seen a major uplift in the 95% mortgage offering which has helped more first-time buyers come to the market.

“Many will be questioning if this level of demand will last once the stamp duty holiday begins to taper off, but let’s not forget that the UK is still faced with a major supply and demand imbalance issue. A lack of new stock, particularly houses with outside space and in rural locations, will continue to push prices up by being outweighed by demand. Plus, the Government may well have something else up its sleeve to support the market once the stamp duty holiday ends.”

Domino’s to hire 5,000 staff on extra demand in UK

Liam Roche
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Domino’s to hire 5,000 staff on extra demand in UK

Domino’s reported an 18.7% jump in first-quarter sales in April

Domino’s pizza (LON:DOM) confirmed on Tuesday that it would hire 5,000 staff, including pizza chefs and delivery drivers, in an effort to boost its sites as demand is picking up across the UK.

While much of the food a drinks industry was forced to let people go, Domino’s provided employment throughout the pandemic.

“We were able to play a part by offering people the opportunity to continue working and earning when times were tough. But as people start to reunite, customer demand is showing no signs of slowing,” operations director Nicola Frampton said.

The pizza company reported a 18.7% rise in Q1 sales as successive lockdowns raised demand for home delivery orders.

The pandemic in general created a jump in demand for takeaway food as people sought comfort while confined to their homes.

Domino’s latest round of hiring comes as hospitality companies across the world struggle to find staff to fill thousands of vacancies.

UK Hospitality has said there was a shortage of approximately 188,000 workers, while uncertainty remains over the strength of the industry being cited as the main cause.

Britain began easing restrictions for outdoor dining in April and allowed full operations at cafes and restaurants by mid-May – all as a part of an ongoing roadmap out of lockdowns.

The Domino’s London share price is up by 0.82% on Tuesday during the morning session.

Castillo Copper announces expanded drilling campaign at Big One Deposit

Liam Roche
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Castillo Copper announces expanded drilling campaign at Big One Deposit

Castillo board ‘optimistic’ value can be created for all stakeholders

Castillo Copper (LON:CCZ), the base metal explorer, confirmed on Monday that its geology team completed the drilling campaign for the Big One Deposit which will consist of 26 drill-holes for 2,828m.

Th campaign includes 108m of HQ diamond coring in two drill-holes to collect detailed assay, density, and geotechnical measurements. The drilling programme from the year before totalled 21 RC drill-holes for 1,467m.

“The programme, which factors in the recent geophysics survey that comprised six 500-700m lines
across the 1,200m strike event, is designed to extend known mineralisation and build on previous drill
results,” Castillo said in a statement.

Highlights

  • – Castillo’s geology team have finalised a new 26 drill-hole campaign for 2,828m to extend known mineralisation:
    • A key focus is to build on the stellar results derived from previous programmes which included the following best intercepts
      • 303RC: 40m @ 1.64% from (fm) surface incl: 11m @ 4.40% fm 24m, 5m @ 7.34% fm 28m & 1m @ 16.65% fm 29m
      • 301RC: 44m @ 1.19% Cu fm surface incl: 14m @ 3.55% fm 27m, 3m @ 10.88% fm 37m & 1m @ 12.6% fm 37m
      • BO017: 34m @ 1.51% Cu from surface incl: 21m @ 2.25% Cu fm surface, 12m @ 3.44% Cu fm 3m, 6m @ 4.79% Cu fm 3m and 1m @ 9.4% fm 9m
  • – Through reconciling legacy drilling and geochemical data against the 2D and 3D geophysical models, the geology team have optimised and expanded the campaign to target several newly identified bedrock conductors:
    • This includes a large, interpreted anomaly north-west of the line of lode that suggests extensive underlying copper mineralisation is potentially located along fault structures rather than constrained within the trachyte dyke.
  • – Logistical support for the upcoming campaign is now in place, while the drilling crew is slated to arrive and commence work within the next one-to-two weeks.
  • – In readiness for the next phase of the campaign, which will see drilling move on to the Arya and Sansa Prospects, the geology team are reviewing all key data points to ensure optimal results:
    • Notably, there are several bedrock conductors across these two prospects that are prime drill-test targets including EG01 – which is interpreted to be 130m thick, 1,500m by 450m, and circa 430m deep.
  • – In line with the Castillo’s strategic intent to evolve into a mid-tier copper group, the Board remains optimistic 2021 will be a transformative year.

Simon Paull, Managing Director of Castillo Copper, said: “Reconciling geophysics findings with legacy drilling and geochemical data should enable Castillo’s geology team to design effective drilling campaigns for the Big One Deposit, Arya and Sansa Prospects with a high degree of confidence. Consequently, as we progress through several phases of exploring the Mt Oxide Project over the balance of 2021, the Board is optimistic value can be created for all stakeholders.”

New AIM admission: Belluscura

Andrew Hore
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New AIM admission: Belluscura

Medical devices developer Belluscura has gained FDA clearance for its portable oxygen concentrator (POC) and it is on course to start selling the POC device in the next few months. The oxygen market is worth billions of dollars and portable oxygen concentrators are the fastest growing part of the market. Covid-19 has accelerated demand for oxygen, although not as much at the portable end of the market.
There are other products that use the same basic technology that are being developed and could generate further revenues in a few years.
There was £17.5m raised - the company was originally seek...

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