FEW REASONS TO
BE CHEERFUL ABOUT 02
Copyright 2001 www.tombraiderchronicles.com
[ November 8th 2001 ]
was ever any doubt it now seems certain that the
demerger on November 19 of BT's mobile phone arm,
the ludicrously named mm02, will be a very damp
squib. While most commentators have been drawing
attention to the poor performance of its core
UK business and the uphill struggle it faces to
turn around its loss-making German venture, market
professionals have found another reason to be
bearish about the spin-off. The impact it will
have on the MSCI indices.
largely invisible to UK investors, the MSCI benchmarks,
created by investment bank Morgan Stanley, have
a massive following across the world. Over $3
trillion (£2.05 trillion) of assets are measured
against its indices, compared with the estimated
$700bn which follow FTSE.
to over-representa tion in the telecoms sector,
MSCI has decided mm0<->2 will be excluded from
all its various European indices. This means those
funds which track the composition of such indices
will be forced to sell any mm0<->2 shares they
to Deutsche Bank analyst Nizam Hamid, that could
be as many as 360m shares. Although that will
be offset by demand from other index trackers,
dealers still expect 250m shares to hit the market.
Institutions can start dumping mm0<->2 shares
on Monday, when trading on a "when issued" basis
commences, but Mr Hamid expects most of the selling
to occur at the close of business on November
19, as this is the benchmark price in the index
expects Future BT to come under pressure. As a
result of the demerger, BT's weighting in the
Dow Jones Stoxx 50 index will fall, and investors
will need to rebalance their holdings by offloading
around 40m shares, he says. BT, which publishes
first-half results today, closed down 5p at 338p,
while on the grey market CityIndex was offering
a spread of 72-77p for mm0<->2.
wider market, meanwhile, leading shares closed
higher for a sixth consecutive session, thanks
to a recovery on Wall Street after an early markdown
and strength in Vodafone, up 3.75p to 175.25p,
as buyers emerged ahead of next week's interims.
London left it late, and the advance was unspectacular.
The FTSE 100 settled 2.2 points higher at 5,216.3,
with investors taking the view that the Federal
Reserve's overnight interest rate cut had already
been priced into the market.
the IT services and software group, was the main
talking point among the blue chips, falling 49p
to 768p on rumours that a leading broking house
- said to be CSFB - was advising clients to sell
ahead of today's trading update.
dealers said that while such tittle-tattle was
justified by the recent profits warning from competitor
CMG, off 3.25p to 225p, it flew in the face of
recent comments made by Logica's finance director,
Andrew Given. On October 24, he told reporters
that Logica had not been "particularly hit by
September 11", and saw no reason to change its
was also speculative interest in mining group
Anglo American, down 3p to 880p, after UBS Warburg
placed 10m shares at 872p on behalf of South Africa's
super-rich Oppenheimer family, having bought the
stock at 863p just 30 minutes before the close.
Oppenheimer's gained a holding of 60m Anglo shares
through a complex £13bn deal that saw diamond
producer De Beers taken private earlier this year.
According to market sources, the Oppenheimers
have agreed not to sell any more stock this year.
eve of its third-quarter figures, insurer Royal
& Sun Alliance dipped 4p to 382p as dealers noted
talk that the company is working on a plan to
free up capital by reinsuring its life assurance
division's book of policies. Royal Sun needs to
raise extra cash to expand its core general insurance
Pearson, the owner of the Financial Times, slipped
37.5p to 838.5p after UBS Warburg surprised the
market by lowering its recommendation to "hold"
and cutting its pretax profits forecasts for the
next two years by 11% and 7% respectively.
Pearson's profits warning three weeks ago, which
it blamed on a slowdown in ad revenue, traders
thought they had heard the back of earnings downgrades
for the media group. But UBS is worried that the
economic downturn could hurt its core education
business - the one area of its operations that
has performed strongly this year.
slipped 5p to 2229p as ABN Amro adopted a more
cautious stance on the stock. Advising clients
to "reduce" their holdings, ABN said it ex pected
Sage's position as the dominant supplier of accountancy
software to small and medium-sized business to
come under pressure in the next few years. As
such, the Dutch broker reckons the current premium
rating of Sage can no longer be justified.
distributor Premier Farnell topped the FTSE 250
leaderboard, boosted by interim results from blue
chip peer Electrocomponents, up 42p to 494p. Not
only did Electro's numbers meet expectations,
it also said trading at its US businesses had
recovered to pre-September 11 levels. That news
saw Premier advance 23p to 241.5p.
the computer games publisher, was marked 3p higher
at 235p in the wake of strong first-quarter figures
from French rival and former suitor Infogrames.
Discount retailer Matalan improved 28p to 360p
after a large line of stock was cleared. Talk
that house broker UBS Warburg is working on a
bullish research note also helped. The FTSE 250
rose 27.5 to 5,526.9.
the small caps, Entertainment Rights jumped 3.5p
to 14.5p as investors warmed to the £5.1m acquisition
of Postman Pat.