John Clemmow: Global Market Report

MONEYWEB, BY BRUCE WHITFIELD, 21 SEPTEMBER 2001

BROADCAST TRANSCRIPT. Well, the JSE certainly battled today. And it’s time for the global market report with John Clemmow at Investec in London. John, it’s been a dreadful, dreadful week here. How are you feeling after the markets in London?

JOHN CLEMMOW: It’s been interesting. The last couple of hours have been very interesting. At one stage I think there was a sense of almost capitulation taking place in European markets today. The DAX is off nearly 7.5%, the CAC was off 6.5% and the FTSE was off 6.5%. New York opened pretty badly and then clawed its way back. We saw the Dow nearly managing to trade flat for the day. It’s subsequently started weakening again and the Dow is currently off 2.6%. But the result was that the FTSE actually closed only, if I can use the phrase, only down 2.2%. And this is quite interesting because the South African dual-listeds staged a fairly dramatic revival once the South African market had closed. I’m sure your listeners will be interested in some of these things. For example, Didata closed here in London at 68p which is off just a quarter of a pence. Which equates, at the current exchange rate to R8.68, as opposed to the R7.94 it closed at in South Africa. That’s a big gap. Anglo American was at an equivalent price of R88.60 as opposed to the R87.90. SAB R53.49 as opposed to R52.50 and Old Mutual at R12.67 as opposed to the R12.20. So it was quite a recovery in the dual-listed stocks and, indeed, most of the markets in Europe in the last portion of trading. Now, as I said, the US started to recover principally because GE gave out some very decent guidance, and there were some quite strong rumours of a possible emergency rate cuts that were going to take place possibly today. It’s now starting to weaken again, and I think the real reason for that is the expectation that something is going to happen over this weekend in a military and political sense is quite high, and nobody wants to be that long over the weekend.

MONEYWEB: It is interesting that you do point out that our South African dual-listed shares have strengthened because they did have an horrendous day with, as I said to Arthur Buchner a moment ago, the likes of Dimension Data and Old Mutual touching new lows. Even South African Breweries today down to R52.50. Did that have any sort of recovery towards the end?

JOHN CLEMMOW: Yes, as I said South African Breweries did recover.

MONEYWEB: I beg your pardon, yes.

JOHN CLEMMOW: South African Breweries did recover and close at about R53.49. Yes, look it was interesting that the weakness in South Africa, in the South African stocks, didn’t manifest itself later on in London. But that was part of a broader trend. As I said, the FTSE at one stage was off 6.5% and it closed off just 2.2%. So, yes, there was a recovery as we saw the improvement in Wall Street. But I’m afraid I have to concur with your previous commentator that we are seeing futures expiry ahead of what looks like to be fairly serious military action. We’re seeing a jumpy world and we’re seeing people, particularly in New York, who are still scarred by the events that took place. Funerals are starting and it’s not generally a terribly happy period and, of course, there is another event which is going to take place next week which is going to make trading, certainly in New York, quite thin, and that’s Yom Kippur.

MONEYWEB: Is there anybody brave enough to call a bottom in the market at the moment, or is everybody just too cautious?

JOHN CLEMMOW: Oh, plenty people brave enough to call a bottom. The question is whether they’re right or not.

MONEYWEB: Would you call a bottom in this one?

JOHN CLEMMOW: What I would say is that the reaction on equity prices has largely been driven by some elements, I think, of forced selling. Certainly, if you look at the patterns that are emerging, particularly in New York, you notice that there seems to be a sort of a three o’clock rally that tends to take place most days. And that’s after the pension funds, sorry not the pension funds, the life insurers and the general assurers, who are assumed to have been liquidating positions to raise cash for the claims they’re going to be facing, come out of the market. There’s also, which we saw yesterday, there was Bill Bass of the Bass family who was a forced seller on margin of a huge chunk of Disney shares. So there are elements of forced selling taking place. No if’s no but’s. European insurers, American insurers, are selling and there are certain wealthy individuals, quite a few I believe, who are also in that position. When you are selling into a thinly traded market and an area of panic, prices can certainly overshoot. So although I think we at Investec would not say that prices can’t go down any further, we would say that we are in areas of outstanding value in a number of categories across the board. So that although, given the technical circumstances, you might see the market going lower, you are in fantastic value territory.

MONEYWEB: John Clemmow from Investec London. Thank you very much. Arthur, I saw you nodding your head as John was talking about the forced selling aspects. Clearly, is it something that’s happening here as well?

ARTHUR BUCHNER: It’s definitely happening here. Guys are having money pulled out of their unit trusts. People are liquidating. They’re looking at a recessionary environment, and they’re saying we want our money in cash – and so the unit trusts are forced sellers.

MONEYWEB: But nice to see that our dual-listed companies, Didata, Anglo, SAB, Old Mutual, all of those picking up towards the close in London. It’s almost a pity that we’ve got a public holiday here on Monday.

ARTHUR BUCHNER: Well I take the other view. We had the Dow futures down about 486 points, and the Dow will more than likely close down today. Which means that we can expect a rally on Monday, so when we come in on Tuesday we can benefit from that. I think ahead of a weekend people are very scared, and I cannot see the Dow rallying ahead of the weekend with any threat of violence.

MONEYWEB: That is Arthur Buchner from BOE and before that you had John Clemmow from Investec London. We certainly look forward to seeing what happens on the market on Tuesday morning.

Posted in Market commentary

Traders’ updates

Quoted

Subscribe via Email

Enter your email address to receive notifications of new posts by email.

Free demo account

platform
Open a free demo account and play around with 100k for 20 days in order to test the platform. Trade local and international instruments. Get it now.