Travel sector hit by terrorism in Nice and Turkish coup attempt
Travel shares lost ground amid mounting investor concern that the strife in Turkey, coming so soon after the tragedy in Nice and the surprise Brexit vote, will deal a heavy blow to the tourism industry.
Thomson and First Choice owner Tui slumped 19p, or 2pc, to 942½p and FTSE 250 rival Thomas
Cook fell 0.55p to 63¼p yesterday, in what was stock market investors’ first chance to react to the attempted military coup in Turkey on Friday evening. The country’s Borsa
Istanbul 100 index also dropped 7.1pc, its worst fall since June 2013.
Turkey had been an important destination for Tui and Thomas Cook, although a string of terrorist atrocities in the country in recent months meant bookings had collapsed. The latest violence, which comes as the summer holiday season reaches its peak, scotches any hope of a Turkish tourism revival and adds to the wider woes facing the travel industry.
“The horrendous events in Nice on Thursday and the political turmoil in Turkey have negative ramifications for a travel segment already reeling from the impact of multiple terrorist attacks and uncertainty surrounding Brexit,” said Numis analyst Wyn Ellis. “All hopes of a strong late market have, in our view, evaporated.”
The Nice attack was one of a series of terrorist outrages, from Belgium to Tunisia, that have shaken tourism firms over the last year. More recently, the Brexit vote, which has pushed up the cost of travelling abroad for Britons by sending sterling sharply lower, has rattled the industry. The collapse of Low Cost Travel Group last week while 27,000 of its customers are abroad on holiday may also knock consumer confidence in holiday companies.
Tui was one of the heaviest fallers in a FTSE
100 that climbed 26.18 points to 6,695.42, boosted by ARM Holdings, which surged 486p to £16.75 after the microchip designer agreed to a £24.3bn takeover by Japanese telecoms giant SoftBank.
The £17-a-share offer comes at a 43pc premium to Arm’s closing price on Friday and spurred speculation other UK technology companies are vulnerable to bids, especially in the light of
sterling’s post-Brexit plunge, which makes British businesses cheaper to potential overseas buyers. Imagination Technologies, a smaller rival to Arm, climbed 18¾p to 205p, and software companies Sophos and Sage advanced 14.7p to 230p and 15½p to 668p respectively.
SABMiller, the FTSE 100 brewer that has agreed a £77bn takeover by Stella Artois owner AnheuserBusch InBev, edged up 4p to £44.29 amid mounting speculation its suitor could be forced to improve the terms of the acquisition. The pound’s recent weakness means the complex two-part deal – which includes an allcash offer and an alternative offer of unlisted AB InBev stock and cash – increasingly favours SAB’s two biggest shareholders.
UBS analysts said yesterday their “base case” was that the takeover terms would not change, but added that every 5pc increase in AB InBev’s allcash offer up to 15pc would have only “limited impact on the deal economics”, suggesting scope for the bidder to sweeten the terms if it wished. SAB holds its annual general meeting on Thursday, which could see investors question the deal. Lloyds Banking Group fell 0.4p to 55.59p after the experts at Natixis warned that the impact of Brexit on the UK-focused lender will harm its profitability and so “limit its dividend paying capability for the next few years”. If the Bank of England cuts interest rates to counter an economic slowdown it will hit Lloyds’ net interest margin, the Natixis analysts cautioned, adding that the lender also “has particular exposure to the UK housing and mortgage markets”, which are expected to be affected by Brexit. They cut their rating on Lloyds shares to “neutral”, from “buy”.
Similarly Intu Properties, the shopping centre owner, closed down 2.6p at 279.3p after Citigroup analysts downgraded to “neutral”. The analysts said that following the Brexit vote they expected commercial real estate prices to fall by between 15pc and 20pc by the end of the year, which they described as “a correction not a crisis”.
However, while not a forecasting a full-blown crash, it was enough for them to cut their recommendation on Intu.
‘The horrendous events in Nice and the political turmoil in Turkey have a negative effect’