20 ★ Wednesday 13 November 2019
Leo Lewis
Markets Insight
Rockwell Automationrallied after the
factory equipment maker beat forecasts
with its fourth-quarter earnings. Better
than expected sales in Latin America and
Europe offset a North American
slowdown, while the company’s 2020
guidance reflected growth from life
sciences and food manufacturing
compensating for continued weakness in
chip and motor orders.
Advance Auto Partswas under
pressure after its quarterly report showed
margins squeezed. Analysts blamed a
change the retailer made to its loyalty
discount coupons, which reduced the
minimum spend and thus triggered a
rush for low-value, low-margin products.
Tyson Foodsfell after a slaughterhouse
fire caused its sales to disappoint.
HomebuilderDR Hortonedged higher
after its quarterly update showed
forecast-beating 14 per cent order growth
and a 1 per cent improvement in average
selling prices. The Midwest was the
company’s best-performing region, with
orders surging 56 per cent year on year.
Western Unionfaded after
Guggenheim advised to take profit.
Craft Brew Alliancemore than doubled
after AB InBev agreed a buyout of its
partner brewery with a cash offer at a 125
per cent premium.Bryce Elder
Wall Street Eurozone London
Solvaywas in demand after Berenberg
added the polymer maker to its “buy” list.
While investors were disappointed by a
lack of disposals flagged in Solvay’s
recent strategy review, its new chief
executive had spent a decade improving
chemicals businesses before selling them
so might only want to avoid being a
forced seller of distressed assets before
they were fixed, Berenberg said. It called
Solvay “arguably the most undervalued
large-cap chemicals name” awaiting the
expected simplification process.
Iliadsoared after founder and majority
shareholderXavier Nielmoved to
consolidate control of the French
telecoms group, which analysts saw as
probable preparation for an acquisition.
The company launched a share buyback
for about half its free float at a 26 per
cent premium to Monday’s price, financed
by a rights issue guaranteed by Mr Niel.
Barry Callebautslipped after Jacobs,
an investment group linked to the
company founder, cut its stake in the
chocolate maker to below 41 per cent,
with a 10 per cent stake sale.
Infineonrose after its full-year
earnings beat forecasts and left 2020
expectations unchanged. Fellow
chipmakerDialoggained on reassuring
guidance.Bryce ElderDraxgained after Merrill Lynch advised
buying ahead of the power station
owner’s capital markets day next week.
Strong cash flow gave Drax options,
including the expansion of its
increasingly valuable flexible generation
capacity, and the stock should be immune
to election risks, Merrill said.
Vodafonerose on the back of forecast-
beating quarterly revenue, with growth in
Turkey and Egypt adding to a robust
performance in core European markets.
Electrocomponentsled the FTSE 250
fallers after an interim update from the
widget distributor indicated slowing like-
for-like sales growth and margin pressure
due to weakness in underlying markets.
DCCslipped after mixed interim results.
The Dublin-based support services
conglomerate, which takes about two-
thirds of earnings from fuel transport and
marketing, said 2020 would be “broadly
in line with current market consensus”,
allowing for headwinds in the UK,
particularly for its technology business.
Trainlinedropped after pre-float
investors led by KKR cashed out their 14.
per stake in the ticket booking website.
Discount retailerB&Mfell on news it
was reviewing its German operations,
which were the cause of interim results
missing forecasts.Bryce Elder3 Gold price slides as investors retreat
from haven assets
3 Global stocks climb ahead of Trump’s
New York lunchtime speech
3 Europe’s auto groups rally on hopes of
US tariff reprieve
Global stocks climbed ahead of a
lunchtime address by Donald Trump at
the Economic Club of New York in which
the US president criticised the Federal
Reserve for cutting interest rates too
slowly and said a trade deal between
Washington and Beijing could happen
soon.
The FTSE All-World index rose 0.3 per
cent, to stay near its highest level since
January 2018.
The S&P 500 index was up 0.3 per cent
by midday, while the technology-leaning
Nasdaq Composite index advanced 0.
per cent.
In Europe, auto groups rallied following
reports that the US president was
considering postponing tariffs on the
continent’s carmakers.
The news helped the Stoxx Europe 600
Automobiles & Parts index close 1.9 per
cent higher, outperforming the wider
benchmark, which closed up 0.4 per cent.
Spanish bond yields rose three basis
points to 0.46 per cent, a four-month
high, as the government’s caretaker
prime minister announced it had made a
preliminary coalition with the far-left
Podemos movement.
Gold was trading close to its lowest
level in three months yesterday as upbeat
market sentiment led investors to retreat
from haven assets.
The precious metal has been one of the
best performing commodities of 2019 but
it dropped 3.7 per cent last week as
investors rediscovered their animal spirits
amid easing geopolitical tensions and
signs of stabilisation in the global
economy.
The gold price slipped 0.1 per cent
yesterday to $1,454 an ounce.
“Equities are gaining and safe havenassets are under pressure, as the market
has moved into risk-on mode, with the
twin headwinds of trade and Brexit risk
perceived to have eased,” said analysts at
Morgan Stanley.
Brent crude, the international
benchmark, increased 0.3 per cent to
$62.39 a barrel while WTI, the US marker,
climbed 0.4 per cent to $57.04.
The Hang Seng rebounded 0.5 per
cent, having closed on Monday at its
lowest level of the month following
further violent protests in Hong Kong.
Anna GrossWhat you need to know
Gold slips to three-month low as risk appetite returns
Gold price ( per troy ounce)Source: Bloomberg Aug NovThe day in the markets
Markets update
US Eurozone Japan UK China Brazil
Stocks S&P 500 Eurofirst 300 Nikkei 225 FTSE100 Shanghai Comp Bovespa
Level 3096.51 1594.95 23520.01 7365.44 2914.82 106438.
% change on day 0.31 0.42 0.81 0.50 0.17 -1.
Currency $ index (DXY) $ per € Yen per $ $ per £ Rmb per $ Real per $
Level 98.350 1.101 109.150 1.284 7.003 4.
% change on day 0.153 -0.181 0.041 -0.233 -0.044 0.
Govt. bonds 10-year Treasury 10-year Bund 10-year JGB 10-year Gilt 10-year bond 10-year bond
Yield 1.929 -0.255 -0.041 0.715 3.248 6.
Basis point change on day -1.210 -0.900 2.920 -0.500 0.800 4.
World index, CommodsFTSE All-World Oil - Brent Oil - WTI Gold Silver Metals (LMEX)
Level 358.57 62.17 56.97 1458.70 16.88 2823.
% change on day 0.23 -0.10 0.12 -0.37 0.42 -1.
Yesterday's close apart from: Currencies = 16:00 GMT; S&P, Bovespa, All World, Oil = 17:00 GMT; Gold, Silver = London pm fix. Bond data supplied by Tullett Prebon.
Main equity markets
S&P 500 index Eurofirst 300 index FTSE 100 index||||||| |||||||| |||||
Sep 2019 Nov2880
2960
3040
3120
||||||||||||||||||||
Sep 2019 Nov1480
1520
1560
1600
||||| |||||||| |||||||
Sep 2019 Nov7040
7200
7360
7520
Biggest movers
% US Eurozone UK
UpsDxc Technology 16.
Rockwell Automation 12.
Tyson Foods 6.
Fortinet 3.
Mckesson 3.Iliad 20.
Infineon Tech 6.
Solvay 4.
Deutsche Post 3.
Credit Agricole 2.Evraz 4.
M&g 3.
Aveva 3.
Vodafone 3.
Experian 2.
%
DownsAdvance Auto Parts -8.
T-mobile Us -2.
Expedia -2.
Viacom -2.
Cbs -2.
Prices taken at 17:00 GMTSeadrill -8.
Caixabank -3.
Continental -3.
B. Sabadell -2.
Alstom -1.
Based on the constituents of the FTSE Eurofirst 300 EurozoneDcc -6.
Fresnillo -4.
Ocado -2.
Tesco -1.
Diageo -1.
All data provided by Morningstar unless otherwise noted.T
he number of foreign com-
panies listed in Tokyo is an
illuminating index of the
city’s status as an interna-
tionalfinancialcentre.
For years, that indicator has been
flashing red. Now the group is down to
four,andthreatenstodisappear.
The latest to leave was US insurer
Aflac — a departure that has cut the
share of foreign listings in Tokyo down
to0.1percentofthe3 ,687companies.
Contrast the early 1990s, when for-
eign listings were at their highest at 125,
or about 7 per cent of all companies
listedinJapanatthetime.Thecountry’s
era-defining property and stock market
bubbleshadyettoburst,andcompanies
were drawn in by a sense the Asian eco-
nomicpowerhousewasunstoppable.
At the peak, the Tokyo Stock
Exchange offered secondary listings of
heavyweight global names including
British Gas, Disney and E xxonMobil, all
hoping to deepen their presence in the
world’s second-biggest economy and
benefitfromitsvastpoolofcapital.
Now, the remaining handful still on
thecity’smainexchangearemuchmore
obscure: YTL, a Malaysian conglomer-
ate; MediciNova, a US pharma start-up;
Techpoint, a small producer of imaging
chips; and Beat Holdings, a Chinese
financial information provider, regis-
teredintheCaymanIslands.
The shrinking foreign presence on
Tokyo’s market reflects Japan’s declin-
ing relevance as a financial hub and the
long-frayed patience of those who have
waited in vain for a surge of domestic
savingsintothenation’sstocks.
Masatoshi Kikuchi, a strategist at
Mizuho Securities, said the bursting of
the economic bubble left Japanese
“quite risk averse” and cautious about
trading foreign equities. “Then tradingvolume declined and foreign companies
chose to be delisted to cut listing fees,”
headded.
For foreign companies, the cost of
being listed — and providing Japanese
translations of documents and accounts
— is fairly high. Maintaining a listing in
Japan also provides a negligible advan-
tageindoingbusinessinthecountry.
When Aflac announced its departure
from the TSE in August, it noted that it
had listed in 1987 to raise its profile in
Japan: a then exponentially growing
marketitwaseagertopenetrate.
Analysts say that judgment was prob-
ably correct at the time: the status oflisted companies to most Japanese was
higher than that of their non-listed
counterparts. But no longer. Aflac
departed with an assurance that “the
TSE delisting is not expected to have
anyimpactonAflac’sbusinessinJapan”.
Aflac’sofficialreasonfordelistingwas
that the traded volume of its TSE-
quoted shares had fallen to extremely
low levels. It is the complaint most often
citedbytheforeigncompaniesthathave
delistedsincethe1990heyday.
The decline in volumes is the result of
big changes in the way Japanese invest.
Three decades ago, foreign companies
chose to list in Tokyo because domestic
retail investors could not buy foreign
stocks on foreign exchanges. Now, the
biggest online Japanese brokerages give
instant, uncomplicated access to shares
onmostmajorglobalbourses.The decline of Tokyo’s relevance as a
financial centre is a perennial sore, and
one that successive TSE heads and
Tokyo governors have failed to solve.
The latest push was last month, when a
delegation that included Hiroshi
Nakaso, the former deputy governor of
the Bank of Japan and Yasumasa
Tahara, a director at the Financial Serv-
icesAgency,travelledtoNewYork.
Their pitch to a group of about 20 rep-
resentatives of the world’s largest global
asset management firms included an
account of recent progress on corporate
governance and the claim that the
Tokyo financial market “will become a
gateway to global investors for the
[small and medium-sized enterprises]
and start-ups in the Asia-Pacific region”.
The questions they faced, say people
who attended, related to the Japanese
government’s plans to tighten controls
on foreign investment, and the strong
impression that it will reduce the influ-
enceofactivistinvestorsfromoverseas.
Underlying the “FinCity.Tokyo”
pitch, was a logical leap that many have
made before. There are $16.8tn of Japa-
nese household assets, about half of
which are currently allocated to bank
deposits. The country’s changing demo-
graphics mean that by 2040, 35 per cent
ofJapanesewillbeagedover65.
At some point, said Jesper Koll, Japan
head of fund management group Wis-
domTree,thebigshiftfrombankdepos-
itstodomesticequitieswillcome.
Foreign ownership accounted for 4
per cent of Japan equities three decades
ago; now it is 30 per cent. But it is clear
that investors do not come to Japan in
pursuit of non-Japanese stocks. Aflac
and the other departees seem to have
gotthemessage.[email protected]Sun threatens to set
on foreign companies’
Japanese listings
Aflac’s official reason for
delisting was that the
traded volume of its TSE-quoted shares had fallen
NOVEMBER 13 2019 Section:Markets Time: 12/11/2019 - 19: 08 User: peter.bailey Page Name: MARKETS2, Part,Page,Edition: EUR, 20 , 1