Capco and others picking up on the JSE
Speculations about Brexreverse help British shares.
the results of Britain’s EU referendum, in which 51.9% of the voters voted in favour of exiting the EU, impacted heavily on many British shares, especially those of some property companies. But it appears that there has been a change in gear judging by the recovery in prices. One of the shares hardest hit was Capital & Counties plc, which weakened by 59% since reaching its high in December 2015.
This is especially attributed to the fact that it owns valuable properties in the heart of London, which is expected to experience pressure because international companies currently trading with ease from the city in the huge EU market are expecting restrictions owing to Brexit and could move to other European centres. The decision by the May government to call an election in June, does however raise expectations that Brexit could turn out quite differently or could even be cancelled. The latter possibility was dubbed Brexreverse by The Economist.
Since the referendum, a raft of problems has arisen that have upset the British, such as the possibility that Scotland and Northern Ireland could break away because they wish to remain in the EU. Another important matter that has arisen is a warning by Sir Julian King, the European commissioner in charge of security, that the country’s security services are becoming increasingly dependent on the EU in order to do their work efficiently. For Britain – a prime target of Muslim extremists – security is of the utmost importance.
The extent to which Brexit has been plunged into uncertainty by the election is best illustrated by the nickname given to the premier – “Theresa Maybe”.
Capital & Counties was listed this week as one of the strongest shares as it lies above its 200-day exponential moving average (EMA) for the first time since March last year. Since its low in March it has improved by almost 30%, while its price/volume trend (PVT)* has moved upwards, a trend that has also been noticed among the other British shares on the JSE. The company has also been aided by the news that it has sold certain interests for £296m to German institutional investors.
It is noticeable that there is a divergent group of companies among the top 10 this week. Top of the list is Tharisa plc, a mining group with its head office in Cyprus, which has platinum and chrome interests in SA, followed by Sappi, which is currently experiencing a strong bull trend. Its PVT is one of the strongest on the JSE, which means that strong accumulation is taking place. Naspers** is once again also one of the top 10. The consensus recommendation regarding Naspers is 15 buys, with no hold or sell recommendations. Its PVT is also very strong, which confirms that this very expensive share is experiencing major buying pressure.
Lonmin remains the weakest share. It is expected that something will have to give at this large platinum group in the near future. The bear market in gold shares remains intact with especially DRDGOLD, Sibanye and Harmony out of favour with investors. Of the shares that have broken through, Mediclinic is the star after it rose quite sharply. Hyprop and Amplats are also interesting as they got support at their 200-day EMAs – a point where many investors who buy for the long term tend to place their orders.
*PVT is calculated by multiplying a share’s volume with the percentage change in its price and then to reflect these values in the form of a graph.
Theresa May Prime Minister of the UK