After Meyer Burger (SIX: MBTN) at the end of October 2013 and Burckhalter Holding (SIX: BKRN) beginning of October 2013 today a further company has joined the list of those dissatisfied with IFRS rules, complexity and costs: Kaba (SIX: KABN) released this press release today: kaba-switches-from-ifrs-to-swiss-gaap-fer. Kaba Group sells its products and solutions all over the world. Its main markets are Europe, North America and, increasingly, the Asia-Pacific region.
The press release:
Kaba switches from IFRS to Swiss GAAP FER
The Board of Directors of Kaba Holding AG has decided to change to Swiss GAAP FER for the preparation of the company’s consolidated accounts as from the new financial year (starting 1 July 2014). Kaba’s registered shares remain listed on the SIX Swiss Exchange and are still included in the Swiss Performance Index (SPI).
Kaba Holding has used the IFRS accounting standard since 2004. In recent years this standard has become more and more demanding. It has required increasingly complex and time-consuming details and disclosures, which have tied up ever more internal resources. Swiss GAAP FER takes a more pragmatic approach that meets all the needs of a medium-sized international company like Kaba Group and those of its stakeholders while keeping the work required to a sensible level. Using Swiss GAAP FER, Kaba will continue to report fully and transparently in accordance with the “true and fair” principle.
The application of the new accounting standard will allow Kaba to charge all goodwill through shareholders’ equity. This will reduce the level of total assets and the equity ratio, which, based on the last audited balance sheet of 30 June, will come to around 47%. Now that the proportion of long-term assets is lower, Kaba has defined a new target for the equity ratio of 20%. Even after the switch this target figure will easily be exceeded. The change of system will also make it simpler to value Kaba’s pension fund liabilities. Under Swiss GAAP FER there will no longer be any need to carry out expensive actuarial valuations. For the 2012/13 financial year, the absence of amortisation on intangibles would have left consolidated net profit around 5% higher. As a result of the switch from IFRS to Swiss GAAP FER, Kaba’s registered shares will now be traded in the Domestic Standard. Following the decision by Kaba’s Board of Directors to make this change, an application has been submitted accordingly to the SIX Swiss Exchange AG.
Kaba will produce a detailed assessment of the previous year under the new accounting system when it publishes the 2014/15 results.
These figures from the spanish Ministry of Housing and the UK’s Halifax and Bank of Scotland show that the pain isn’t over in Spain in a clear cut way.
These figures from the Deutsche Bundesbank show that Germany is not feeling any pain, on the contrary, it’s attracting investors to their city property markets (red) in particular.
This overview of option strategies can come in handy when discussing with clients or prospects how to best capitalise on their / my views for index or single equity levels and other instruments.
Today I came across the graph below (arrows and highlighting added by me) on the website of the Swiss Old Age and Survivors Insurance (OASI/DI – AHV/IV – AVS/AI). It shows the equity portion of the holdings and how they switched from close to 30% Emerging Markets in December 2012 to 15% by September 2013. And at the same time increased holdings in European Large Caps by close to 10%. What I hadn’t been able to deduce rightaway, whether they sold out after underperforming by 15% and were maybe chasing outperforming indices on a quarterly basis, or if they changed their strategy ahead of time, i.e. in an adaptive fashion. Two possible conclusions: acting pro-cyclically or using market timing, i.e. active management – or more specfically enhanced indexing (the latter as it turns out). The former would be tough, the latter maybe less so.
This second graph shows the performance of the Eurostoxx 50 vs the MSCI Emerging Markets ETF for the last 12 months.
The graph below shows that a very large portion of the over CHF 30bn in the Siwss Old Age and Survisors Insurance fund is invested using enhanced indexing. Enhanced indexing is a hybrid between active and passive management and describes strategies used in conjunction with index funds for the purpose of outperforming a specific benchmark.
Certain market participants believe that short sharp corrections, aka a Flash-Crash, are caused by ominous or secretive algorithms.
The action in the Dax Future on February 6th is an example that the F.A.Z. sees as a Flash-Crash, – even though the exchange was quick to point out that they wouldn’t describe it like that.
If you take a close look at what the reason for this ‘Flash-Crash’ was, it boils down to simple supply and demand dynamics being misjudged by certain market participants during news events. Ahead of a central bank interest rate decision every market maker goes cold on his bids and offers (or widens them massively) so as not to be exposed to surprise news.
Now if you have certain market participans who put in large conditional orders for the moment the news hits their large sell or buy orders will hit an air pocket, i.e. hit a half empty order book with spreads that are unusually wide in comparison to regular trading.
It’s the same in the forex market, just on much smaller % changes. I guess one or two market participants learned this lesson on February 6th.
The fact that even the arbitrage between cash and futures market failed for a short while shows you that the basket execution for hedging the Dax Future isn’t available in any size at every time.
The above article scan is from the F.A.Z. newspaper (Frankfurter Allgemeine Zeitung)
This list, exclusively compiled by Zuberbühler Associates Ltd for proprietary client trading strategies, shows which stocks had most off-exchange trading volume (06-02-2014). Interesting on todays list: Peach Property has a large institutional bidding the order book. Currently there are 30k bid in the order book at 10.15. Considering that kind of size is the usual daily volume the off market of close 55k on February 6th and that the price has since risen slightly, one can assume the off-market seller was done around 10.50 and maybe moved to over 11. In Swissquote maybe George Mansour from Amman, Jordania is active off-market (he owns over 5%). Here’s an interesting interview with the CEO of Swissquote regarding MIG Bank acquisition which George Mansour had owned (in french).
|Peach Property N
|ST GALLER KB N
|PARTNERS GROUP N
|FLUGHAFEN ZUERICH N
|NOBEL BIOCARE N
|OC OERLIKON N
This list, exclusively compiled by Zuberbühler Associates Ltd for proprietary client trading strategies, shows which stocks had most off-exchange trading volume (05-02-2014). Interesting on todays list: DKSH (Market Expansion Services Group with a focus on Asia)and gategroup (leading independent global provider of products, services and solutions related to a passenger’s onboard experience) once again (already on 04-02-2014) active. VZ Group was however the largest by % of trades shares off market today. The stock had fallen off a cliff around January 20th.
|VZ HOLDING N
|MYRIAD GROUP N
|CEMBRA MONEY BANK N
|FLUGHAFEN ZUERICH N
|MEYER BURGER N
|TECAN GROUP AG N
|BC VAUD N
|BARRY CALLEBAUT N
|PARTNERS GROUP N
The data below is from a large universal bank in Switzerland. It shows that close to a quarter of the entire banks trading profits come from structured products. The fact they make 300% more money with structured products vs equity trading and equity derivatives tells you a lot about margins and how widespread the use of structured products has become. From a client perspective investing in these instruments this can’t be good news regarding the long run accumulation of returns.
This shows that universal banks tend to be milking clients or that they are proposing using a lot of tax-efficient structures, which tends to pose a problem down the road. In the latter case with tax authorities in the former with clients (if they ever get educated to the effects of structured products on long-term wealth creation).
Also see my post on equity linked bonds (and the payoff diagram of the equity linked bond in particular) to see how attractive certain structured products are for the investor, and how attractive for the seller (bank).
Today, reading the F.A.Z, I came across this ad for equity linked bonds. These kind of products are interesting as they appeal to people’s need or demand for a high guaranteed percentage return. Everyone knows that current interest rates are close to zero, so you get a lot of regular, even university educated people who are attraced to the high yield shown in the ads (and touted with: “chance for attractive returns, equity bonds with high interest rate on DAX stocks”), but still don’t see the risks associated with them. Their brain has been conditioned to associate a yield and bond price like quote with a safe bond. And who wouldn’t want 7,50 to 8,00% for investing in solid companies such as German automakers. People always need cars.
The role your financial advisor is normally paid for is to recommend good risk-return strategies. Equity linked bonds are rarely such a tool before costs, and even less so after costs. Also they involve you selling short a put. If potential investors saw the phrase: short a put and pocket the premium (for that is what they are doing), they might think twice. The bank guaranteed high nterest rate idea on the other hand hooks the gullible and is therefor the bait. These products get advertised for a simple reason, they allow a higher margin to be pocketed by the firm, in this case Deutsche Bank.
If you look at a payoff diagramm of an equity linked bond you see that your profit is capped and your loss is open ended (apart from interest, i.e. the put premium). Does that sound like a good strategy to pay a bank 100-200bp for? Also note that these products have a time to maturity of 10-14 months. That’s why banks love these products. They simply offer a higher return to them. You are not getting a high enough return as an investor for the risk you’re taking.
In a derivatives lecture my professor pointed this out. One of the young german bankers got pretty aggressive at that point, and very defensive, saying that they were a good deal for the client. The professor said they weren’t. My role as your financial advisor, or of my company, is to make sure you are getting paid for the risks you take and fully aware of the pitfalls.
This list, exclusively compiled by Zuberbühler Associates Ltd for proprietary client trading strategies, shows which stocks had most off-exchange trading volume (03-02-2014). Interesting on todays list: Interroll (rollers, components, drives and modules for material handling, storage and automation) had seen a nearly 24% rise since October 2013 and looks to be consolidating on insider trading. More than half the days volume off-market on Monday. Seeing as they are a logistics and automation play they would be a winner in protracted world growth (P/E ratio expansion). And a potentially a loser (P/E contraction) should the emerging debt and FX crisis prove to be a sustained influence.
|TECAN GROUP AG N
|NOBEL BIOCARE N
|FLUGHAFEN ZUERICH N
|PARTNERS GROUP N
|Weatherford International N