Markets live chat transcript for the chat ending at 12:02 on 15 Jul 2008. Participants in this chat were: Paul Murphy (PM) Bryce Elder (BE)
PM:
Welcome to Markets Live
PM:
This FT Alphaville’s daily markets chat.
PM:
On time for a change
PM:
Catch everyone out
PM:
We’ve had a bit of a run here recently.
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With stories – Neil Hume has been conjuring them up like there’s no tomorrow.
PM:
And I can report that
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For his next trick
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Neil has…
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Disappeared!
PM:
That’s right – puff – and he’s gone.
PM:
I think he will be back, but not in time for today’s ML session.
PM:
He’s at some kiddies sports day or something.
PM:
Competing against other fathers. Pics will be posted as soon as we have them.
PM:
In the meantime im just going to mind the ML shop – putting stuff up as I get it.
PM:
I will generally try (and fail) to answer any questions below.
PM:
Feel a bit like a middle of the night talk show host.
BE:
It’s alright Murph, I’ll help you out.
PM:
Ah, Bryce – well done.
PM:
Bryce Elder, who works with Neil on the Markets Desk has agreed to lose his ML cherry this morning.
PM:
So be gentle on him, dear readers.
PM:
PM:
How are things looking this morning?
BE:
Market as a whole is back in the dumps.
BE:
Asia weak overnight – even if Wall St was relatively stable.
BE:
There’s a belated consensus that the Freddie and Fannie rescues are not actually good news after all – just a reminder as to how badly things have deteriorated.
BE:
And there’s all the debate about whether the Fed can actually afford a bail out.
PM:
Of course central banks can just print money – but there’s always a price to pay for that.
PM:
The ZIm and Bush dollars would begin to converge
PM:
If they are not doing so already
BE:
The dollar’s gone through 1.60 versus the euro.
PM:
and we’ve also got $$ pounds
PM:
two dollars that is
PM:
And equities?
BE:
Anyway – the FT SE 100 is off 85 points at 5214 As we speak.
BE:
We’ve also had some shocking CPI numbers.
PM:
Shocking?
BE:
Year on year inflation jumped from 3.3 per cent in May to 3.8 in June.
PM:
That is shocking
BE:
Sterling surged on the back of that on the expectation of rate rises
PM:
PM:
So pretty rock out there again
PM:
Bryce — you do indeed need to get a photo
PM:
But this was a last minute appearance
PM:
Cos that useless N Hume character let us down
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again
PM:
he’s just rubbish — like the dollar
PM:
and helen
BE:
Taxloss – very amusing.
PM:
Good point from jack below…not so much price of money that’s a problem, as quantum of money available…
PM:
The Hoof — to what do you refer?
PM:
PM:
In the meantime, lets go to British Energy
PM:
What’s happening there
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See its is the top of the Footsie leader board
BE:
Two stories doing the rounds.
BE:
The first is ahead of its AGM on Thursday.
BE:
Morgan Stanley suggesting they’d be well advised to ditch the EDF bid talks and go instead for a joint venture.
PM:
ah yes
PM:
Do you have the MOST note?
BE:
JV for new nuclear more likely: BGY is still in talks
with interested parties, who are either looking to make a
full offer for the company, or to partner in new nuclear
build. Given the tension between investors (and BGY)
who see high value for the company in the current power
market conditions, and utilities (who will have more
conservative assumptions), we believe that the JV
option is the more likely outcome.
with interested parties, who are either looking to make a
full offer for the company, or to partner in new nuclear
build. Given the tension between investors (and BGY)
who see high value for the company in the current power
market conditions, and utilities (who will have more
conservative assumptions), we believe that the JV
option is the more likely outcome.
BE:
BGY shares held back by market uncertainty:
Although a good performer year to date following the
announcement of talks back in March, BGY shares have
moved in line with the sector in the last three months,
while the UK power price has increased by 38%.
Counter-intuitively, the current talks appear to be acting
as a brake on share price performance. Clarity should
provide the catalyst, in our view.
Although a good performer year to date following the
announcement of talks back in March, BGY shares have
moved in line with the sector in the last three months,
while the UK power price has increased by 38%.
Counter-intuitively, the current talks appear to be acting
as a brake on share price performance. Clarity should
provide the catalyst, in our view.
BE:
Is a decision nigh? BGY is making announcements to
the market twice within the next month – first, its AGM is
this Thursday, followed by 1Q results on August 13.
There is no official timetable in place while the company
is in an offer period, but we believe that BGY will be
looking to clarify matters at the first available opportunity
– this should be the catalyst for the shares.
the market twice within the next month – first, its AGM is
this Thursday, followed by 1Q results on August 13.
There is no official timetable in place while the company
is in an offer period, but we believe that BGY will be
looking to clarify matters at the first available opportunity
– this should be the catalyst for the shares.
BE:
Current commodities priced in at Drax: Drax shares,
on the other hand, have risen 37% against the sector in
the last three months, mirroring the power price. We
have increased EBITDA estimates for 2008-11 by 52%
on average. But holding current commodity prices in
place in the long term, we calculate that the stock is still
discounting £70/MWh power, BGY ‘just’ £60/MWh.
Long BGY, Short DRX: This spread, we believe, is too
great. Once the current bid talks are resolved, we
believe that this should be the catalyst for the gap to
close.
on the other hand, have risen 37% against the sector in
the last three months, mirroring the power price. We
have increased EBITDA estimates for 2008-11 by 52%
on average. But holding current commodity prices in
place in the long term, we calculate that the stock is still
discounting £70/MWh power, BGY ‘just’ £60/MWh.
Long BGY, Short DRX: This spread, we believe, is too
great. Once the current bid talks are resolved, we
believe that this should be the catalyst for the gap to
close.
PM:
bickie
Reminder to readers – if you arrived late and want to stop the dialogue ‘jumping’ as you catch up, hit the ‘pause auto-scrolling’ tab at the bottom right hand corner
PM:
Ok — that’s your first explanation — was there a second?
BE:
The other theory is RAW.
RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.
PM:
red raw i presume
BE:
Suggestion of another bidder emerging at the last minute.
BE:
No names, no price, no details yet.
PM:
BE:
So obviously, this one comes with a huge health warning.
PM:
Price is moving tho – BE currently trading 19p higher at 725
PM:
In a sick market
PM:
Dow futures suggesting another 100 point fall on the Street this afternoon
PM:
PM:
Quick bit on the miners.
PM:
Done a further post on Kazakhmys and the Usmanov merger. Everything we know is in here:
BE:
The point to stress is the indicative valuations. Kazakhmys is being valued at $20 – against a current market value of $13bn.
PM:
So the market is sceptical of this deal being pulled off.
PM:
We don’t know of course.
PM:
We just know that a lot of very senior financiers have been spending huge amounts of time on this – shuttling between London and Mosco and Astana,
BE:
The new capital of Kazakhstan
Astana, the capital of Kazakhstan since 1997, is a thriving and modern city developing at an amazing pace and a major political and cultural center which has already hosted important international forums.
Present day Astana boasts new modern government and business offices, a five star hotel and a number of good quality hotels to accommodate visitors, apartment blocks matching the European standards, beautiful squares and boulevards, modern roads as well as river promenade on both banks of the River Ishim.
PM:
Random thought: is there a good set of travel guides for corporate financiers.
PM:
Random thought: is there a good set of travel guides for corporate financiers.
Im not talking about Wallpaper guides or something, concentrating on architecture and local walks.
Im not talking about Wallpaper guides or something, concentrating on architecture and local walks.
PM:
Not even guides to the seedy side for visiting businessmen.
PM:
Just simple, smart hotel/eatery guides for unlikely places – like Astana.
PM:
CORRECTION: top source has just been on saying im talking rubbish going on about Astana.
PM:
The serious business on this possible merger is going on in Almaty.
PM:
That’s the old Kazakh capital.
PM:
Happy to set the record straight.
BE:
May as well hear what the analysts think. This from UBS.
BE:
An FT article, picked up by Reuter’s suggested privately-owned Russian iron
ore/steel company, Metalloinvest, was considering a bid for Kazakhmys (KAZ).
Following a 6%+ share price rise for KAZ in London, the company released a
press release stating it “notes the recent speculation regarding a possible
combination …continues to evaluate a wide range of opportunities …preliminary
discussions …may or may not lead to an offer for Kazakhmys.”
ore/steel company, Metalloinvest, was considering a bid for Kazakhmys (KAZ).
Following a 6%+ share price rise for KAZ in London, the company released a
press release stating it “notes the recent speculation regarding a possible
combination …continues to evaluate a wide range of opportunities …preliminary
discussions …may or may not lead to an offer for Kazakhmys.”
BE:
Metalloinvest – more mining company than steel
Metalloinvest is reported to produce 41mt or 20% of Russia’s iron ore production
(as well as 6mt of steel). It is also reported to be considering an IPO. KAZ has
embarked on a diversification strategy and it is not impossible that it could become
part of a Russian iron ore/steel producer, although we believe the greater rational
currently lies in a merger between ENRC and KAZ.
Metalloinvest is reported to produce 41mt or 20% of Russia’s iron ore production
(as well as 6mt of steel). It is also reported to be considering an IPO. KAZ has
embarked on a diversification strategy and it is not impossible that it could become
part of a Russian iron ore/steel producer, although we believe the greater rational
currently lies in a merger between ENRC and KAZ.