Arthur Buchner: Market watcher, Nedbank Securities

MONEYWEB, Alec Hogg, 05 September 2006

Sasol share price under pressure, futures selling, and MTN, JD Group, Acc-Ross and DigiCore highlighted.

MONEYWEB: Good evening. I am Alec Hogg, with you for the next 60 minutes on the Moneyweb Power Hour. Our production editor, Hilton Tarrant, is in the studio.

HILTON TARRANT: Alec, in tomorrow’s Moneyweb Business in The Citizen, why the big four banks are taking on African Bank. Get OMAM’s view. A look at a new product that lets you finance your retirement by using your house, after chatting to the best in fund management, David Carte still thinks DIY is best, and of course the best news and insight from the world’s leading business publication, the Wall Street Journal. All that and more in Moneyweb Business tomorrow.

MONEYWEB: I didn’t know David was much of a do-it-yourselfer. As far as investment are concerned, Arthur Bucher is a do-it-yourselfer. Good to have you in the studio. David Shapiro away, Wayne McCurrie in London, and we had to drag you out of retirement to come and be our market watcher tonight. Arthur is with Nedbank Securities. It was an interesting day. We had the Sasol share price coming under a lot of pressure after the write-off of Condea, and what is interesting is when they did the transaction, Condea, the big chemicals group, there was a lot of criticism by South African analysts and it seems like that may have been justified.

ARTHUR BUCHNER: Well, correct, you know. The criticism was “stick to your knitting”. You manufacture oil – why do you want to get into plastics? And they then validated it by saying, well, oil is used in the manufacture of plastics and we understand that game, and it’s come back to bite them a little bit.

MONEYWEB: A big write-off, nearly R3bn write-off, and the investors didn’t like it, knocking back the share price 3.5%.

ARTHUR BUCHNER: Well, funnily enough, since Friday of last week, with the rand weakness, even the oil price coming back, the rand price of oil wasn’t coming back and our market has been incredibly strong. Sasol hasn’t been following through on the last three to four days. So, I think, someone got a little bit of a whisper.

MONEYWEB: It seems to happen, that. One won’t call it insider trading but maybe just a hint?

ARTHUR BUCHNER: Yes, sort of. I don’t think you should be long of the stock yet and that’s enough to make someone decide to liquidate your [indistinct] portfolio.

MONEYWEB: Also a decline today for MTN, JD Group. I suppose we’ve seen so much volatility in those shares recently.

ARTHUR BUCHNER: Well, we saw quite a lot of futures selling, and some reverse arbitrage activity, which actually brought a lot of those index stocks under pressure.

MONEYWEB: Explain what that means.

ARTHUR BUCHNER: Basically, someone who wants to put a hedge in place on the all-share will sell a whole lot of futures into the market. An arbitrageur has to buy that. They buy those futures and in return sell the physical stock against it.

MONEYWEB: I don’t know any more, but it’s a technical thing that happens every day in the market in big volumes.

ARTHUR BUCHNER: Correct. We’ve seen arbitrage activity and for the first day we’ve basically seen reverse arbitrage, which means selling of the stock. And if a stock was under any pressure or had a selling order it would just exacerbate it.

MONEYWEB: Aha. Now, we did see an improvement today in the share price of Acc-Ross. We spoke on Friday to the new chief executive of that company, Wilf Robertson. He was very upbeat. The share price moved yesterday, moved again today, 12m shares today. Not the kind of share, though, that I guess you’d be investing in?

ARTHUR BUCHNER: No, its not something that we’d look at because it falls outside of the top 65 by market capitalisation. But it is relatively tightly held now. You know, when they first listed it, they listed it and sold it and quite a lot of people bought in the hope of this whole property boom. Now, the guys that have taken off that stock, off the let’s call them the rats and mice, all the IPO guys …

MONEYWEB: We prefer to call them “week holders”.

ARTHUR BUCHNER: OK, the week holders, that’s right. They got all the weak holders out. They now only have the fundamental holders in – and maybe positive news for them.

MONEYWEB: Twelve million shares. It’s quite big volume in an AltX-listed company. And then DigiCore’s results out today, the share price up by 5%. The dividend there raised for the year from 6c to 10c.

ARTHUR BUCHNER: Well, an amazing success story. I think a year and a half ago or so at 70c. The stock has had a fantastic return to investors and one to watch out for in the future.

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