For investors in equities like Compagnie Financière Tradition (SIX: CFT) the following graphs illustrate one of the problems facing the interdealer brokers: Falling Volume, Structural Changes in the Market
The SNB today discussed the reasons for this falling volume in the primary interbank market:
1. Internalising Flows
2. Banks are providing liquidity over alternative plattforms
3. Smaller banks are now often clients of the mega banks
The reasons above were cited by Fritz Zurbrügg of the SNB, June 19th 2014.
The above chart shows the second largest swiss utility (Alpiq; ALPH) share price over the last six months. The green line depicts the SPI (broad swiss performance index). Oh, and the T’s depict management transactions (just some small purchases).
A performance difference vs the broad market of over 30% has occured.
Factors behind this:
– Uncertainity about major shareholders like EDF, and their plans to divest their holdings. So basically an over supply of shares hanging over the stock, sentiment.
– Pricing problem; energy can’t be sold with decent margins (strange really, if you look at Oil price and geopolitical problems in the Ukraine and the impact on Gas supplies…)
– Politics: Governments (socialist, populist) and their efforts to switch off nuclear power plants much quicker than planned for (and amortised). This in turn leads to planning problems and uncertainity of credit worthiness.
– Credit Rating (see politics, pricing) being hit.
This table from the Alpiq website was very interesting. Where credit analysts see deterioating or negative outlook (ZKB, UBS) their analysts are ‘neutral’. An indication that ‘neutral’ is the unofficial sell?
Now from a contrarian standpoint there’s some good news.
– Relative Strength is abissmal
– Nobody I talk too like utilities, especially with nuclear power plants (=everyone’s underweight the stocks, sector)
– Buy when there’s fear (and hope it isn’t just realism)