Another week has passed and here we find ourselves, on the cusp of the weekend. Get yourself comfortable as I run through what we have been chatting about at Three Counties.
Firstly, SNOW! The ability for Britain to grind to a halt at the first glimpse of the white stuff never fails to impress; it is, I believe, part of our genetic makeup. And it does not look like it is abating anytime soon, for us northerners anyway. Sunday looks like it’s going to be a sledge day, so wrap up warm. (All information courtesy of the Three Counties Meteorological Service).
This week’s news headlines have naturally focussed upon the collapse of Carillion, the UK conglomerate which was one of the UKs biggest government contractors. Over the weekend it failed to tackle its £900m debt and £587m pension deficit, threatening the jobs on not only its own 43,000 employees but also thousands of subcontractors and business partners. Its shares closed down 25% on Friday, its last day of trading, ending at 14.7p as news of the potential crisis came to the market.
This fall in value effected many UK investors; large shareholders included Hargreaves Lansdown, Brewin Dolphin and Scottish asset manager Kiltearn Partners who at one point, according to market data from the Financial Times, collectively owned more than 22% of the business. From a quick scan of the UK retail investment universe, it does seem that the majority of active investment managers dodged the bullet on Carillion; as a point of note, Three Counties CORE investment portfolios hold zero exposure to Carillion.
However, there is natural concern with regards to the contracts held by Carillion, issued via Private Finance Initiatives (PFI) and the impact that the collapse will have on their ongoing development. Information received by ourselves from Gravis Capital Management, managers of the VT Gravis UK Infrastructure Income Fund paints a picture in which it seems that the major UK Infrastructure Investment Trusts have already accounted for the collapse and contingencies are well in place. Although Carillion provided a significant percentage of services to UK PFI projects, providers such as Serco are already stepping into the void left and will hopefully provide long term stability to employees affected directly by the collapse.
A slightly less tangible collapse has occurred in the digital world this week, with the bubble surrounding crypto-currencies popping on the back of the “threat” of global regulation (because regulation in finance is a bad thing?). In the United States, regulation has reared its head in the form of the SEC when its newly formed Cyber Unit pressed charges for the first time against PlexCorps, which was accused of defrauding investors through a questionable initial coin offering, or ICO. Almost a week later, SEC chairman Jay Clayton issued a warning on cryptocurrencies to investors, hinting that the commission would begin monitoring the market more closely for any potential violations of securities laws. The US isn’t the only nation taking a harder line on cryptocurrencies either: the Chinese government tightened its ban on crypto trading this week, and the South Korean government is planning on implementing a similar ban itself.
Both of these news headlines have been cited as key reasons gold sales have jumped at The Pure Gold Company, a UK provider of investment services. It saw a 42% increase in first time investors buying gold so far in January compared to the same period a year ago. Possible drivers additionally to the crypto crash fears include geopolitical tensions and uncertainty over Brexit, leading to ‘safe haven’ sales.
And yet, despite all of this negative news, global markets continue moving positively, with our own favourite regions for 2018, Global Emerging Markets and Japan, up 5.06% and 3.25% year to date, with GEM up 1.42% this week alone. So it’s been another good week and remember, its Friday!
An on that note, let me help you enjoy that Friday even more with a playlist from Martin Howe, one of our financial advisers. Keep safe out there and see you next week.