Capco and oth­ers pick­ing up on the JSE

Spec­u­la­tions about Brexre­verse help Bri­tish shares.

Finweek English Edition - - MARKETPLACE - Ed­i­to­rial@fin­ Lu­cas de Lange is a for­mer edi­tor of fin­week and an au­thor of two books on in­vest­ment.

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

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