FT : Remain rally could be short

Remain rally could be short

Energised European secessionism, Westminster rancour, US elections and slowing global growth loom

And, finally, the UK’s referendum on EU membership is upon us.
Let’s say the UK bookies are correct and Brits will vote, just, to Remain. That removes a big risk event hanging over the market, boosting bullish sentiment, optimists may argue.

Not so fast warn some analysts. “The outcome is not binary, in our view, “ said economists at Citi in a note.
“A solid majority to stay would reduce uncertainty most, whereas a “Close Remain” (our base case) could still undermine UK/EU political stability.”
The rancour in Westminster will not vanish. Populist secessionist movements in Europe have been energised.
This has negative implications for governments’ ability to deliver, should they decide to, any fiscal boosts to help the region’s economy.
Which probably means more heavy lifting to be done by the European Central Bank, whose negative interest rate policy is rattling the financial sector.
Currency strategists at Bank of Tokyo-Mitsubishi UFJ also say that the “initial euphoria of a vote to remain may not prove very lasting”.
“The markets will quickly shift focus to other key global issues — in particular the US elections and the continued slowdown in global growth.”
Not forgetting the microeconomic fundamentals — the US second-quarter earnings season will start in a few weeks time as the correlation between S&P 500 members is near a two-year low. At least that’s good news for patient stock pickers.

>>> US Early premarket gappers

Early premarket gappers

Gapping up: SCTY +18.4%, WGO +11%, PSTI +10.7%, PWE +4.9%, LZB +3.2%, SBGL +3.1%, IAG +2.4%, MRO +2.1%, F+2%, CHK +1.7%, KBH +1.7%, ECA +1%, PBMD +0.9%, RIO +0.9%, BP +0.8%, NICE +0.8%, FCX +0.8%

Gapping down: TSLA -11.7%, QEP -5%, CVTI -4.7%, ADBE -4.5%, UAM -4.2%, COT -3.1%, TTM -2.5%, PNFP -1.5%, HPQ-1.4%, POT -1.2%, FDX -1.2%, ETE -1%, IDCC -0.9%, UPS -0.5%

>>> Brexit / Bremain : Strategist Recap


BREXIT WIN SCENARIO
Morgan Stanley
·
Base-case index target for the FTSE 100 in case of ‘leave’ is range of 5000-5300; for the Euro Stoxx 50 is 2400-2550
BofAML
·
Sees European stocks moving 10% either way after Brexit vote; “leave” result would be risk-off event not just in U.K. but also Europe and, to a lesser extent, globally
Sell-off in Europe could translate into 6%-7% drop for S&P 500
“Unquantifiable risk” whether other EU countries would then attempt to leave EU
Recommends long European low-risk dividend stocks, long SXDP index vs short SX3P index, long European index dividend futures, long MSCI EM
Goldman Sachs
·
On average, the ERP (equity risk premium) has risen by ~150bps in past risk-off events. If Brexit were to result in similar scenario, rise in ERP of 150bps from end-May levels would push Stoxx 600 down to 280 and Euro Stoxx 50 to 2400
Cleanest expression of Brexit risk is in U.K. domestic stocks (GSSTUKDE) and especially those with high sensitivity to investment spending
JPMorgan
·
In ’leave’ scenario, euro-area equities would likely underperform U.K. ones, whose relative performance would be helped by GBP weakness
Stays overweight on U.K. equities, which trade “outright cheap” on P/B metric
Citi
·
Given recent equity weakness, likely policy reaction, new oil price regime, base-case Brexit downside risk is ~5%; at extreme end of the outcome spectrum, European stocks could fall 10-20%
FX weakness, especially in U.K., is a key offset and should, in time, support positive U.K. returns, excluding return of full-blown systemic risk
Deutsche Bank
·
Sees 10% downside for European equities
Overweight FTSE, underweight DAX: if Brexit, U.K. equities would outperform European stocks, given likely GBP depreciation as well as U.K. market’s defensive sector structure
Credit Suisse
·
If full Brexit scenario materializes, CS strategists would cut FTSE 100 year-end target to 6200 from 6600, S&P 500 target to 2000 from 2150, Euro Stoxx 50 target to 2950 from 3350
In U.K. stocks, worst performing sectors would be financials, real estate, transport, based on correlations with gilt yields, sterling, PMIs
FTSE 250 to underperform FTSE 100 by 10%-15% due to weaker sterling, PMIs
Societe Generale
·
FTSE 100 to lose 15%; FTSE 250, Euro Stoxx 50, Nikkei to drop 20%; S&P 500 to fall 10%
Following initial market correction, FTSE 100 would recoup most of its losses, FTSE 250 would remain 20% lower, Euro Stoxx 50 would recover 10% from lows, S&P 500 would move back to pre-Brexit levels
UBS
·
FTSE 100 could fall to 5075-5500, or as much as 19%, Euro Stoxx 50 could fall to 2300-2550, or as much as 23%; S&P 500 could fall to 1910-2000, or as much as 9%
Jefferies
·
Sees 5%-10% decline in FTSE banks, euro-zone banks falling by at least an equivalent, if not greater percentage
J. Safra Sarasin
·
A yes to Brexit would probably take equity markets down another 8%-10%
Liberum
·
Favors U.K. pharma, tech, chemicals stocks in case of Brexit


BREMAIN WIN SCENARIO
Morgan Stanley
·
FTSE 100 could rally to range of 6500-6800; Euro STOXX 50 to 3150-3300
BofAML
·
European stocks could move 10% either way after Brexit vote; ’remain’ would likely cause a 3%-4% rally in U.S. stocks
JPMorgan
·
Euro Stoxx 50 could rally to ~3050
Deutsche Bank
·
Sees 10% upside for European equities
Societe Generale
·
Bremain should alleviate uncertainty in Europe, especially for banks which have been strongly impacted by Brexit fears; Long FTSE 100 (unhedged), long European banks, long Euro STOXX 50
UBS
·
FTSE 100 could rise to 6245-6690, or as much as 7%, Euro Stoxx 50 could rise to 3125-3415, or as much as 15%; S&P 500 could rise to 2120-2150, or as much as 3%
J. Safra Sarasin
·
Scope for a “no Brexit” rebound lasting probably 2-3 weeks into mid-July
Liberum
·
Shares in construction, housebuilding, leisure and staffing could potentially be biggest benefactors of “remain” vote

FT : VW boss: ‘What is done cannot be undone’

Any shareholders hoping Volkswagen would cut to the chase and talk about corporate governance reform at today’s annual meeting have been quickly disappointed.

But getting to the point may, in fact, work to some minority shareholders’ advantage – if today’s meeting runs on past midnight it will automatically void anything that is agreed today.

Volkswagen chief executive Matthias Müller (pictured) offered a robust defence of his company in an opening speech, but he failed to address many of the key issues about which investors have long complained – including management pay, a lack of independence on the company’s supervisory board, and a voting structure that entrenches power in the hands of the Porsche and Piech families, Lower Saxony and Qatar, writes Patrick McGee in Hanover.

Mr Müller offered a summary of his “Strategy 2025” plan unveiled last week, in which VW will push to become a leader in electric cars. He also apologised for the diesel emissions scandal and spoke of regaining customer trust. “

“What is done cannot be undone,” he said, later adding: “A shock like the diesel issue can also have a salutary effect.”

But his examples of reform to date were either symbolic — scrapping the company’s boardmember-only elevators at its offices and selling some Airbus planes – or vague, such as guaranteeing product compliance.

Investors have not begun speaking yet, but pre-written remarks suggest complaints about VW’s governance structure will be central.

Dr Hans-Christoph Hirt, Co-Head of Hermes EOS, said in prepared remarks:

Volkswagen needs an overhaul of its corporate governance, including the composition and effectiveness of its supervisory board. As a first step, we urge the company to undertake an externally-facilitated supervisory board evaluation as soon as possible after the AGM.

Christian Strenger, a German corporate governance expert, said:

The board was — and is — solely and wholly responsible for the disaster!

Several shareholder advisory groups have already recommended investors vote against the board. They have also asked for a special audit of the supervisory and management boards to determine whether they were implicated in the emissions scandal.

But minority shareholders have very little power, owning just a little more than 10 per cent of the company. What they could do is drag the meeting on past midnight – thus, as per German law, voiding anything that is agreed today. That would trigger a new AGM, likely to be held in August, but it’s unclear what that would achieve.

FT : US funds cut exposure to UK equities amid Brexit fears

US funds cut exposure to UK equities amid Brexit fears

Portfolios adjusted on short-term views

US-based equity investors have pulled out of the UK at a faster pace than their British-based rivals in a sign that the threat of Brexit is driving a shift in ownership of the UK stock market.
Global US mutual funds cut their exposure to UK stocks in the first quarter of the year to the lowest level in four years, according to Morningstar. They reduced their holdings by 0.51 percentage points compared with the previous quarter, to 8.79 per cent.
UK-based global mutual funds cut their exposure to UK stocks by 0.33 percentage points to 11.84 per cent in the same quarter. Their exposure is still higher now than a year ago.
The faster pace of US withdrawals — which some fund managers say is due to uncertainty surrounding Thursday’s vote on the UK’s membership of the EU — comes at a fraught time in the relations between British and American investors. Tensions have risen over pay, governance and trading philosophies. Some UK fund managers have accused their US rivals of creating market volatility by trading too frequently, and not sufficiently engaging in big decisions such as on executive remuneration.
“There is a more short-term culture in the US,” says Matthew Beesley, head of global equities at UK-based investment manager Henderson Global Investors. “This short-term approach hasn’t been helped by Brexit.”
The behaviour of US mutual funds matters, as the US owns about a quarter of the UK stock market, more than any other country with the exception of Britain itself, which holds 46 per cent. American ownership has risen sharply since the early 1990s, when it was about 5 per cent, according to the Office for National Statistics.
US companies, such as the world’s biggest investment group BlackRock and Vanguard, which is primarily a passive investment group, dominate the shareholder lists of the FTSE 100’s biggest companies, including Royal Dutch Shell, HSBC, GlaxoSmithKline and British American Tobacco.

These US managers are doubly exposed to the risk of turbulence if the UK votes to leave the EU. A mutual fund whose investment portfolio is valued in dollars would lose money on its British holdings if sterling falls sharply, as well as suffering if share prices fall.
Analysts say this might explain the bigger US withdrawals from the UK in recent months.
Vincent Montemaggiore, a portfolio manager at the $5bn Fidelity Overseas fund in the US, says he has scaled back his overweight position in UK stocks in the run-up to the EU referendum.
“I do not like to focus on the macro,” he says, “and 99 per cent of my time is spent on bottom-up analysis, but sometimes you have to step away from the stocks for a second.”
Recent opinion polls show a shift towards Britons voting to remain in the EU.

But assets in the UK fund industry have fallen by almost a fifth during the past 12 months, according to Lipper data — a reduction blamed on investor jitters ahead of the referendum. The FTSE All-Share index has fallen 7 per cent in the past year, compared with a 1.3 per cent drop for the S&P 500.
A Bank of America Merrill Lynch survey of 213 fund managers, released last week, showed international investors had increased their cash holdings to the highest level since 2001.
“It is more difficult to evaluate uncertainty the further away you are from it,” says John Roe, head of multi-asset funds at Legal & General Investment Management. “This is why some US-based and foreign investors can be more nervous about things such as Brexit.”
The US withdrawals come after a recent flare-up of tensions between UK and US investors.
Some UK companies have complained that it is harder to engage with US fund managers, while British investors say their US rivals are more likely to outsource decisions — such as on executive remuneration — to shareholder advisory groups. They have warned this undermines shareholder rights and sours relations with company executives.

“It is appalling the way some US groups simply outsource their vote on pay and other issues,” says the head of sustainability at a UK institution. “The vote is the key lever of influence, yet it is treated like a commodity.”
The chairman of a FTSE group that suffered a big pay rebellion this year adds: “It was disappointing because we tried to engage with the shareholders and the advisory bodies, but there was no dialogue.”
The issue of pay has proved a particular flashpoint between UK and US fund managers this year. During a fiery shareholder annual meeting season British companies including BP, Anglo American and Shire suffered big rebellions over executive remuneration.
Groups such as Los Angeles-based Capital Group and Boston-based Wellington Management Company have been singled out by UK executives as difficult to engage with on the subject.
The UK critics have said these groups “slavishly” follow the recommendations of shareholder advisory groups, such as Institutional Shareholder Services and Glass Lewis, which represent about 30 per cent of investors in the FTSE 100 and FTSE 250.
Michael Cohen, chairman of Capital International, which is part of Capital Group, says: “The number of UK companies that we engage with on remuneration and governance matters has increased significantly over the past several years.”
ISS and Glass Lewis stress they are used as a filter and not as a rubber stamp. Wellington declined to comment.
Other investors say it is unfair to accuse US groups of short-termism as some of the biggest US fund managers, such as BlackRock, are noted for their long-term outlook.
Meanwhile business leaders and investors agree that cross ownership from the US is a force for good and a natural part of globalisation.
“Americanisation of executive pay, with too rigid a following of advisory groups, is not a good thing,” says Simon Walker, director-general of the Institute of Directors.
“But I would not dream of arguing that we should block US firms from owning the UK stock market, even if there is more volatility in the run-up to events such as the Brexit vote.”

(Makor) - Weekly Dividend Report

June 22, 2016 

 

MAKOR - Weekly Dividend Report

 

Good morning, 

 

Over the last week, SX5E Dividend futures underperformed the SX5E Index on the both short and long terms.

 

Single Stock bigger movers: 

 

Intesa San Paolo, 2018 -8.33% at 0.14 (vs 0.18 analyst estimates), we are not seeing any reason for this, stock raised to buy at Socgen and the stock rose by almost 10% over the last week after a 25% decrease in the last three months. The yield (6.30%) stay high compared to other Italian banks (Unicredit 2.78%, BMPS 0.00%).

 

 

 

  

  ​     ​     ​

 

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