This week’s stock market review
Until recently, no one would have imagined that Marks & Spencer, the
epitome of British commercial excellence, could be so careless as to lose its
dominance of the retail sector. Although the board of the ailing company is
relieved that Philip Green has said he has no immediate plans to pursue a
takeover bid, nonetheless it represents the ultimate humiliation for the
company that in its current state potential bidders are very reluctant to bid.
If anything, would-be raiders are expecting things to get worse for the
Green’s truce could be a clever way of deflecting attention from the fact
that his wife was accused of acting on privileged information when she acquired
a large stake in the company immediately before announcing his intention to buy
the retailer. The current share price is pitiful and would suggest that the
company is desperate to link up with a stronger partner and spare its
shareholders further agony.
Rumour has it that the company has something up its sleeve in the semblance
of e-commerce. That said, one wonders whether it will be enough to set the
place alight. Most analysts think that, short of takeover or merger, M&S
needs to replace its board before embarking on any major project.
NatWest takeover leaves sector counting the cost
Change is painful and M&S is not alone. NatWest bank has finally met its
fate but its board remains in denial. There is now no question about the
ability of Royal Bank of Scotland to secure the support of the majority of
NatWest shareholders in its takeover bid.
The dilemma for most UK banks is how to re-invent themselves without killing
off the fruits of their long labour. The share prices in the sector are in a
sorry state. Lack of innovation and proactivity lie at the root of the problem.
Over the years, destructive penny-pinching attitudes in the sector have
replaced constructive customer care.
There is a heavier price to be paid when foreign competition takes hold on
the Internet. Many jobs will be lost in any event, as more ailing banks battle
to remain profitable.
The sky’s the limit for stock market gains – and losses
The stock markets in the meantime remain very volatile. On the one hand,
interest rate rises continue to make investors nervous. But on the other hand,
opportunities in the IT and Internet sectors remain irresistible to those
seeking excellent returns in the short term and are prepared to take the risk.
One danger for fund managers is that the share prices of some of the
heavyweight stocks in the FTSE index is so unrealistically high that a small
change can result in huge losses in their portfolios. Yet for many, there is no
choice but to buy these stocks at their current prices.
By Paul Audu Investment Manager