Christmas brings stability to UK markets

Naeem Siddique, investment manager at Redmayne Bentley.
Naeem Siddique, investment manager at Redmayne Bentley.
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UK markets consolidated during the festive period after receiving a considerable post-general election bounce.

Lower trading volume - a feature of the festive season - seems to have also supported the recent strengthening of Sterling, which extended gains by 0.4 per cent against the Euro and Dollar.

Foreign Exchange traders shrugged off concerns of a no-deal Brexit, helping subdue the large-cap FTSE 100, with a stronger Sterling depreciating value in companies that report their earnings overseas, as is the case for several of the index’s constituents. However, as trading volume and UK politics begin to pick up, expect greater fluctuations in investor sentiment and market prices, with traders no doubt keeping an eye on the looming Brexit deadline.

NMC Health received an unwelcome gift before Christmas - a scathing attack from short-selling firm Muddy Waters - but its share price has now consolidated. The attack caused the UAE-based healthcare company’s price to plunge by 34 per cent in a single session, wiping nearly £2bn off its market value.

The Muddy Waters 34-page report raised serious doubts over NMC’s finances, questioning the group’s cash balance, asset values, debt levels, and reported profits.

The report also cited poor corporate governance, potential overpayment for acquisitions and understated debt, and highlighted a $107.4m investment in the redevelopment of NMC Royal Women’s Hospital, the cost of which Muddy Waters believe to have been excessive. NMC has sought to dispel these accusations and announced it will launch an independent review.

The healthcare firm has provided written confirmation of the total built-up floor area of NMC Royal Women’s Hospital in Abu Dhabi and made floor plans for the hospital (approved by the Health Authority of Abu Dhabi) publicly available.

NMC will likely move to further disprove the Muddy Waters report and any progress made in doing so will likely see its share rise back to pre-report levels. At the time of writing, its share price sits at 1782p.

CLS Holdings, an investor in British commercial property, revealed it would be selling a portfolio of 19 offices located outside the South East for £65m to Capital Partners, a Singaporean investment firm.

The sale falls in line with the mid-cap company’s strategy of actively recycling its capital and focusing its UK portfolio on London and the South East. After the transaction’s completion, CLS will hold just two UK assets outside these regions. Investors received the news well: the company’s share price has risen by 2.57 per cent since the announcement.

Shares of Tesla took a hit on 30th December, after Jeffrey Osborne, Cowen managing director, revealed the automotive and energy firm would be “slightly missing” its 2019 total delivery projections of 360,000 to 400,000 vehicles.

Osborne believes the figure will be closer to 356,000 vehicles, citing softer than expected sales of Tesla’s luxury Model S and Model X. Osborne also set a price target of US$210 in the next 12 months, almost 50 per cent below Tesla’s closing price on December 30. Whether this bearish prediction comes to fruition will depend on the company’s ability to maintain growth despite increased market competition.

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