Tag Archives: finance

US Shutdown no cause for panic (yet)

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The US Government has begun its first partial shutdown in 17 years, following congress’ failure to agree a budget to continue its funding.

 

The S&P 500 closed down 0.6%, whilst the US dollar fell against sterling last night, as investors digested the news.  The market’s reaction to the shutdown has been muted and suggests investors are expecting a resolution to these negotiations.

 

Adrian Lowcock, Senior investment Manager at Hargreaves Lansdown says;-“Investors have become used to political brinksmanship in the US with negotiations going to the wire but each time a resolution has been found.

These negotiations are the warm up act. The bigger issue, in around 17 days’ time, is negotiations to raise the $16.7trn US debt ceiling. Failure to raise the debt ceiling and allow the US government to continue borrowing could force the country into a default scenario which could then have more serious consequences for investors.

A US default is highly unlikely but political negotiations could create volatility in stock markets.

This doesn’t look like a selling trigger. Investors should focus on their long term goals and use any short term weakness as opportunities to invest.”

The 2011 Debt ceiling

In August 2011 a similar scenario played out.  The S&P 500 fell 19.74% from its peak in July 2011 as the S&P credit rating agency cut their top notch rating for the US and investors sold out. However by the end of the year the S&P had recovered and ended the year up 1.46%.

Chris Saint, Head of Currency Dealing, Hargreaves Lansdown “The US dollar extended its recent decline against the pound (lows of US$1.6261) after the deadline was missed. The fallout appears to have been limited by hopes that significant damage to the US economic recovery will be avoided, assuming a resolution can be agreed upon very soon.  In September we saw demand for US dollars rise 29% on the previous month.”

 

At the time of writing, the exchange rate stands at:

 

         Interbank rate                   % daily change

Sterling / US dollar                          1.6242                                           +0.37%


Royal Mail to float – what interested investors should do

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The biggest privatisation for two decades

 

·         Royal Mail to float

·         What interested investors should do

·         IPO Q & A

Today the Government have announced plans to float the Royal Mail in what could be the largest privatisation for two decades. The state-owned postal service could be valued up to as much as £3 billion in an initial public offering (IPO) taking place this year.

 

Richard Hunter, Head of Equities, Hargreaves Lansdown;-

““The success of the Direct Line Group & esure share offers has reignited private investor interest in IPOs. The offer of shares to the public is reminiscent of the float of British Gas in the 1980’s which was accompanied by the “Tell Sid” Campaign. Shares will be marketed to the public and any investors aged over 18 will be able to apply for shares.

 

What interested investors should do

 

Richard Hunter

 

“We don’t have the details of the IPO yet. Investors can register their interest with a stockbroker now and when a prospectus and application pack becomes available they will contact you with all the information needed to invest.”

 

Tell Sid? – Investing in an Initial Public Offerings (IPOs) Q & A

 

From the first “Tell Sid” privatisation of British Gas in the 1980s, flotations and Initial Public Offerings (IPOs) have always been of interest to the investor. Richard Hunter, Head of Equities, explains how they work.

 

What is an IPO?

 

An Initial Public Offering (IPO) is where the owner(s) of a company sell all of part of their stake to the public in order to raise money. This cash can then be used to grow the company or simply be returned to the owners. An IPO is also commonly called a flotation.

 

An IPO may only be made available to institutional investors or to a mixture of private (retail) and institutional investors. An IPO happens in three stages.

 

1.            The Intention to Float – The company announces to the stock market, public stating they wish to float the company

2.            Preparation of Prospectus – The company will then prepare and release a prospectus. This aims to be the definitive document relating to the launch and will describe the offer in detail. Applications to buy shares in an IPO should always be made on the basis of the information contained in the prospectus

3.            Sale of shares – The company and their advisers invite applications for the shares. The IPO will be open for a fixed time known as the Offer Period

 

When will the share price be known?

 

In some cases fixed price offers are made and the investor will know the share price in advance. Alternatively the share price will not be known until the date the company floats. In some cases the company will provide an indicative range for the flotation price of the shares e.g. £2.00 to £2.20. The precise price won’t be fixed until near the listing date and may depend on demand for the shares. Once the share has floated on the open market, the price will the rise and fall as all other shares do.

 

Why would investor want to get buy shares at IPO?

 

An IPO allows investment in a company when it first enters a stock market.

 

When will shares go on sale?

 

The timetable for an IPO generally spans four weeks. An Intention to Float announcement is made and then around two weeks later the prospectus is issued and the offer period starts. It is during this period investors can apply for shares.

 

Where can investors get a prospectus for an IPO?

 

Interested investors should contact a stock broker who will be able to register your interest in receiving a prospectus. In some cases a stock broker will provide research and updates as information becomes available. For example, Hargreaves Lansdown has been involved in the majority of IPOs over the last 30 years.

 

How do investors buy IPO shares?

 

Investors can buy IPO shares through a stockbroker. A share dealing account should be opened and money deposited to buy the shares. This can be done online or over the telephone using a debit card, or alternatively a paper application accompanied by a cheque can be used.

 

How many shares can investors buy from an IPO?

 

There is normally a minimum number – If the offer is oversubscribed investors may not be able to buy all the shares they want to buy. If this is the case the balance of money can be used to buy other shares or can be refunded.

 

Can investors buy IPO shares through an ISA, SIPP or Junior ISA?

 

In some cases money in an ISA, SIPP or Junior ISA can be used to buy IPO shares. This depends upon which market the company is listing upon and the type of IPO.

 

What dealing costs are paid?

 

Buying IPO shares is often free for investors.

 

Hargreaves Lansdown’s charges are as follows:

 

IPO share purchase                         Free

Share account charge                     Nil (Other charges to hold shares may apply e.g. in ISA and SIPP (ISA – 0.5% capped at £45 a year, SIPP – 0.5% capped at £200 a year).

 

Selling IPO shares will be subject to a dealing charge from £5.95 and no more than £11.95 (online).

 

Buying IPO shares after the offer period, when the shares are available in the market, will be subject to a dealing fee of no more than £11.95 (online) plus stamp duty of 0.5%.

 

Is there a minimum holding period? How quick can an investor sell?

 

There is no minimum period, but generally it takes 3 working days from the date of the float to issue the shares and selling cannot practically happen before then.

 

How will investors be able to sell IPO shares?

 

This is easy. Simply choose when and how many to sell, and execute the deal online or alternatively instruct a sale over the telephone. Dealing online is almost always cheaper than dealing over the telephone.

 

Will there be a dividend from IPO shares and if so, how will they be paid and when?

 

This depends upon the company. The prospectus will normally detail any proposed dividend policy.

 

How will investors find out if there are any special discounts or shareholder perks?

 

If there are any, they will be detailed in the prospectus

 

What are the risks?

 

The value of shares will fall as well as rise, so investors may get back less than they invested. Dividends are not guaranteed and, if paid, are variable. During the period between the Intention to Float being announced and the start of the offer period, the intention may be withdrawn. This rarely happens.

A company which is the subject of an IPO may not have a long track record and could be difficult to value or calculate a fair price. In many IPOs investors do not know the share price before committing to buy and therefore may end up buying at a higher price than they wished.

Investors should read the prospectus and any supplementary documentation as this will include the main risks of investing.

 

Are Vouchers Now Cool?

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Sienna-Miller05_glamour_1ju_592x888Saving money is important in today’s climate. While the recession grumbles on with only slight growth people are having to look around to find ways to have the same standard of living. It seems we are working harder for less and less. Understandably, our attitude to money is changing. When we work so hard for so little, or have no job at all, we all become more frugal with our cash, and who can blame us for being fussy about spending our hard earned money?

Back in the day vouchers used to be incredibly uncool. Cutting clippings out of newspapers to save 30 pence was not worth the embarrassment at that time. But times change and now vouchers are cool. The embarrassments is no longer there because thrift is in.

This is in part due to the recession. Interest rates are low, jobs are hard to come by or keep, wages are not rising but the cost of living is. Our finances are stretched like never before. This is why not only have vouchers become popular, but voucher websites have also become part of our culture. We can save money on clothes and make up, food and drink, but we can also save money on going out. You don’t have to be rich to live rich; you just have to be savvy.

There are a lot of options for finding vouchers. There are still many in traditional media like magazines and newspapers. However, Coupon websites such as voucherbox.co.uk are where it is at. They help people save money and still live despite the squeeze. It seems folly now to buy anything without one or even go out. I don’t know anyone who goes to Pizza Express without checking the internet for buy one get one free vouchers.  We never need to buy full price ever again.

What is your opinion? Do you use vouchers or coupons? Comment below.

 

 

Chinese Shanghai Composite index falls 5.3% on Monday

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Recent actions by the Chinese regulators to curb lending has further unnerved investors already unsettled by recent comments from Ben Bernanke. The interest rates Chinese banks charge each other surged last week to record highs before falling back.  And following a recent statement by the People’s Bank of China, the Shanghai Composite Index fell 5.3% Monday night.

 

Adrian Lowcock, Senior Investment Manager, at Hargreaves Lansdown;-  

 

“China’s new leadership is addressing some of the risks that have been building up in the banking system, inevitably this could result in some short term pain, possibly impacting on growth but it should benefit China in the longer run.  Chinese stock markets do look cheap at present,  based on 20 years of information.   In addition it is important to remember that China is a state-controlled economy and therefore it is very difficult to make a clear judgement on the accuracy of the information being provided.   There are some concerns China’s shadow banking system will spiral out of control, however it seems unlikely the People’s Bank of China will let the system fail.“

 

“In line with their 5 year plan China is undergoing a change from an export driven manufacturer to a consumer focused economy. This transition is not going to be smooth and there will be some bumps along the way.  China continues to grow, at around 6 to 7% per annum, but like all emerging markets this does not lead to a smooth rise in the equity market.

 

In 2007 investing in China was very popular and as a result valuations rose to very high levels. The market has underperformed both developed and emerging markets since. There are clearly issues in China’s financial system and authorities are now taking action to deal with these. For long term investors that want to have exposure to China this setback could be providing an opportunity to invest. Company earnings are rising and valuations are looking much more attractive. Most investors can get sufficient exposure through a well-diversified emerging markets fund such as First State Asia Pacific Leaders which has 23.9% in the region or Aberdeen Asia Pacific which has 18.47% in the area.   For investors wishing to take a more adventurous approach and are able to tolerate a higher level of risk then Jupiter China, managed by Philip Ehrmann, provides exposure.”

 

Finding the Right Car for You

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therightcar380x249

Buying a new car is a daunting task, whether you are a first-time buyer or have had several cars over the years. Like buying a house or a holiday, buying a new car is a big commitment, takes up a lot of time and effort and can cost you quite a bit.

There are a few simple things to remember when buying a new car that should make the whole process go a lot smoother. Here is a quick guide to help you avoid the common mistakes when buying a car and help you make the right decision first time.

New vs. Used

First you need to decide whether you want to buy new or used. The process with each is quite different and so you need to be aware of what you’re getting into before you start. The positives with buying new are that you can pick exactly which specifications you want plus new cars often come with incentives such as interest free purchase and fuel discounts. The downside is you often pay more overall. Used cars may limit your choices but you can often find a great bargain and you avoid the initial depreciation of the car since it has already left the showroom.

What do you want?

When it comes to buying a new car it seems that every man and his dog has an opinion about what, how and where you should do it. But when it comes down to it, who do you trust? The important thing is to figure out what you want from your new car, not what everyone else thinks you want. If you are searching for something small and fuel efficient to drive around a city with, or a big family car that is economical as well as safe, then the places you look for cars is going to be quite different. Before you even start looking for a new car, decide exactly what it is that you are looking for. This will save a lot of stress further down the line and help to keep you on track.

Reputation

When you are buying your car, you want to go to a place that has a trusted name and a strong reputation for good customer service and after-sales. Online review sites are a vital part of this process and can be instrumental in finding the right purchase for you. Check trader websites for their testimonial and review pages, as well as their sales to build up an idea of the company itself. Websites that have pages such as Reviews of Big Motoring World for example, are a great way to get an overall idea of the standard practices of a business.

Do Your Research

In the end, the simplest advice is the best – do your research. As with any big purchase, don’t feel rushed to buy the first thing that comes along. Take your time, mull it over and make sure your buying the right car for you.

Financial matters upon divorce or dissolution of civil partnerships

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Hill Dickinson gives Frost Readers the low down on separating.

When the majority of married couples divorce it is likely that there will also be financial matters to deal with. This may include the family home, businesses, pensions or maintenance. The same circumstances will also apply to the dissolution of civil partnerships.

 

It is important that financial matters following a divorce or dissolution are finalised to ensure that you are protected against any future claims from your former husband or wife or civil partner.

 

Financial matters will be resolved when the parties receive a final order from the court. This does not mean that the parties will need to attend court; but legal advice should be sought to ensure that you are protected for the future.

 

If a final financial order is not received then there is a risk that your former husband, wife or civil partner could make a claim in the future.

 

It is important to note that the court will consider financial circumstances at the time they are resolved. Although in some cases the parties’ circumstances at the time of separation may be relevant.

 

The outcome of any court hearing or negotiation will depend massively upon the circumstances of the case. The court in England and Wales has very wide discretion to deal with matrimonial matters as they see fit.

 

There are circumstances where assets acquired during a marriage or civil partnership could be excluded from financial matters upon divorce. So it is imperative to seek advice upon separation.

 

In 2011 the High Court heard a case where they were asked to resolve financial matters following a divorce. The wife had won the lottery during the marriage. Part of the lottery winnings had been used to purchase the matrimonial home.

 

The court found that there is a sharp distinction between “matrimonial” and “non-matrimonial” property. As the lottery ticket had been purchased following separation, with the wife’s sole earnings and without her husband’s knowledge the court found that the lottery winnings were “non-matrimonial”.

 

However, the wife had used some of the lottery winnings to purchase the matrimonial home. The court held that the money spent on the house was converted into “matrimonial” property. The High Court ruled that matrimonial property is more likely to be shared, and consequently the husband was entitled to receive a proportion of the matrimonial home.
These sorts of cases are fact specific and it is for that reason that it is essential that separated couples seek advice as to the legal consequences of their separation.

 

If financial matters are resolved at the time of divorce, the majority of orders will include a clean break. This means that the agreement is in full and final settlement of any claims either party will have against the other in the future. A clean break may not be appropriate for example if monthly maintenance is being paid to a former spouse.

 

Kobo Aura HD Launched

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I went along to the launch of Kobo’s new eReader at Millbank Tower in London tonight. Kobo launched their new eReader: The Kobo Aura HD. It is the most advanced HD eReader, has a 30% larger reading surface and it’s design was inspired by, wait for it, paper books. It has the most paper-like E Ink display. Kobo did a lot of research into just what their customers wanted and the Aura is it. It is an eReader for people who love books and reading. It is a beautiful device. Very elegant and easy to use.

Kobo Aura photo(7)

The Aura is lightweight and easy to hold. Kobo are calling it the ‘eReader, re-imagined’. It is elegant and has high resolution, 265 DPI. It has 4GB of storage and one charge equals two months of battery life. It also has 20% faster page turning.

In stores April 25. RRP £139.99. You can pre-order from later today.

Economics of crowd-sourcing under spotlight

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A team headed by an economist at the University of Portsmouth has won £750,000 to establish why people give up their time to help scientists better understand some of the biggest mysteries, from searching for the cure for cancer to trying to understand the galaxies that fill our Universe.

Dr Joe Cox, of the Portsmouth Business School, will lead a team from Oxford, Manchester and Leeds Universities and colleagues from Portsmouth’s world-leading Institute of Cosmology and Gravitation, to find out more about the people who volunteer to help online science projects.

The grant for the three-year project was awarded by the Engineering and Physical Sciences Research Council (EPSRC) as part of the Research Councils UK digital economy theme.

Dr Cox said: “Hundreds of thousands of people all over the world are giving their time to help find a cure for cancer, or to better understand the nature of the Universe, or patterns of global warming, but we don’t yet have a detailed understanding of the processes that drive these initiatives, which are more complex than they may first appear.

“The growth of the digital economy has dramatically affected the ways people interact with each other and engage in different activities, but little is known about the changing nature of volunteering and crowd-sourcing in this context.

“This grant will allow us to formulate new economic models to explain the choices, motivations and behaviours of digital volunteers.”

The project will also investigate ways in which volunteering can be optimised and sustained through strategic interactions and interventions on the part of the managers of these resources.

Dr Cox will be working with Dr Karen Masters of the Institute of Cosmology and Gravitation at Portsmouth to study the Zooniverse (www.zooniverse.org), a highly successful and diverse cluster of online citizen science and crowd-sourcing projects inspired by the success of Galaxy Zoo and now includes more than 20 projects including  Cell Slider  and Seafloor Explorer. Volunteers on these initiatives give up their time to interpret and classify data of scientific interest, ranging from images of distant galaxies to weather patterns and cancer cells.

Dr Masters is project scientist for Galaxy Zoo.

She said: “We hope this grant win will help us to understand how to improve the volunteer experience on Zooniverse projects so that people can feel confident they are contributing to real science when they spend time on our sites, and also gain the maximum enjoyment from the experience.”

Dr Cox said: “Technology has made it possible for the average person on the street to make a real contribution towards our understanding of the universe, the modelling of climate change and the development of a cure for cancer.

“Our research will show how these initiatives can encourage more people to volunteer, as well as enhancing the depth of their engagement, which will help to push the boundaries of scientific knowledge and create significant social value.”

The findings will be of “considerable interest” to web communities and the broader voluntary sector, he said, and is likely to also have significant implications for commercial projects that make use of crowd-sourcing, such as Amazon’s Mechanical Turk.

The research partners include Dr Chris Lintott, Oxford University, Dr Anita Greenhill, University of Manchester, and Dr Gary Graham, University of Leeds.