Arthur Buchner: Nedcor Securities

MONEYWEB, BY BRUCE WHITFIELD, 27 JANUARY 2003

BROADCAST TRANSCRIPT: Arthur Buchner, head of derivatives, Nedcor Securities, joins us now. Arthur, single-stock futures are not new to South Africans. It did take a long time for the concept to catch on in South Africa. Liquidity was often blamed by traders. That seems to have changed, and they are becoming a lot more popular.

ARTHUR BUCHNER: Unbelievably so. I mean, this week has been fantastic on the single-stock futures. I think today we traded 22 counters, yesterday we traded 25 counters. And if you look at the volumes in relation to the market in the different counters that are trading, I reckon 3-4% of the different counters. Today I think in Anglos, we did around 1.5%. I think Anglos traded 3.5m shares. You work that out, it’s not too bad.

MONEYWEB: The liquidity issue then – it has evaporated so to speak?

ARTHUR BUCHNER: There is no liquidity issue. Because whatever the liquidity is in the underlying, that dominates liquidity in the single-stock future. If you want to sell 5,000 Anglos and there are 5,000 Anglos in the underlying market, there is a price in the single-stock future. So there’s no single quote on a market where you look at it. You phone up the broker and you say to him, I want to sell a single-stock future, 5,000 Anglo American. He phones the market maker and the market maker makes him a price, because there is liquidity in the underlying. So that liquidity issue is totally blown out of the water – there is absolutely as much liquidity as the underlying.

MONEYWEB: But then a big debate also as to whether you go for single-stock futures, or do you go for warrants. The warrant market seems to be losing a lot of popularity.

ARTHUR BUCHNER: I think the warrant market, as a warrant per se, is dead. I think that the new esoteric-type products, which the warrant issuers or the retail-listed products guys are coming out with, are there to try and actually stop single-stock futures from taking off or trying to actually pull back a little bit of their market. It’s just impossible, because in single-stock futures, your costs are just set out, there are no hiddens. What you get is what you see.

MONEYWEB: The main purpose of this feature is to raise money for the Aids orphans, our Moneyweb portfolio. Have we got any money in it?

ARTHUR BUCHNER: We had a lot of money up until about two days ago.

MONEYWEB: What went wrong?

ARTHUR BUCHNER: Anglos pulled back, and we’ve got a position in Anglo American at the moment. Anglos has pulled back about R10 from that. W e are long of 200 shares in Anglo American. So that amounts to about R2,000. We had R4,500 in the bank. We had a great position on Amplats. We bought in at R321, got it up to R358. Got a bit greedy, I think. Then again, we did see the platinum price up at $670. So at $670 you think, gee, the platinums are flying and meanwhile, what’s happened is that Amplats has come back to $630. We are in the money there. So not too bad, but it would have been nice to sold out at the 58 and then we are holding on Nampak. Nampak has just come under pressure on the whole Indi and American markets coming under pressure. Overall, we’re just up. We were up, I think, at last count, R250.

MONEYWEB: It just does illustrate how hairy this is, because we’ve seen a massive decline in the markets, in the equities today, and that is reflected in what our portfolio is doing too.

ARTHUR BUCHNER: Correct. Well, one of the things with the portfolio is that we tend to be quite static. So we are trading at almost like an asset manager would trade a portfolio – they would say R316, Amplats is a buy. We will buy it, we will hold it for a year. Single-stock futures, as warrants were when they first came out, they are great trading tools. If you see the market go up 5%, you make yourself 50%. If you see them go down 5% – So the Amplats as an example, R316, R350, sell out, no costs really involved in it, and then maybe even go short. Look to pick it up. So be very active on your portfolio, and you can make bundles of loot.

MONEYWEB: And unfortunately for the Aids orphans, the portfolio not looking very good at the moment, but hopefully markets have to bounce back every so slightly, we hope, Mr Shapiro?

DAVID SHAPIRO: Yes, I think maybe it’s time to go bull now. But a little disappointing that all that money has been whittled away. We should have gone short, though, but it’s Arthur’ s fault – he didn’t come and tell us.

MONEYWEB: All these things are easy in retrospect. Thank you very much, Arthur Buchner from Nedcor Securities.

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