Shares falter on doubts over emerging markets - City comment
6 February 2014
After an initial wave of optimism in 2014, investors have become increasingly concerned about the sustainability of growth in emerging markets.
Thu, 6 Feb 2014 | Kean Marden, head of business services equity research, Jefferies International
After an initial wave of optimism in 2014, investors have become increasingly concerned about the sustainability of growth in emerging markets.
Doubts created by several months of slowing growth in China have been amplified by severe currency weakness in a number of emerging markets, particularly in those countries – Brazil, India, Indonesia, South Africa and Turkey – fortunate to be dubbed the ‘fragile five’ by economists. In response, some central banks have raised interest rates in an attempt to prevent further currency pressure and inflation. For the pessimists, this rekindles memories of the late 1990s Asian crisis.
Here in the developed world, economic news has been more positive. Wintery weather in North America has clearly had a negative effect (which I can understand as it hit -27 deg when I was in Chicago in late January) but the UK outlook remains optimistic. Nevertheless, Asian fears have weighed on sentiment and the FTSE100 index has declined by 5% over the past fortnight.
Within the recruitment sector, US shares once again underperformed their European peers with Manpower down 14% and Kelly Services by 9%. Matchtech (-9%) and Adecco (-7%) propped up the bottom of the table in Europe.
The leader board is headed by Staffline (+13%) due to better than expected results and a generous dividend hike. Elsewhere, USG (+10%) benefitted from upgrades by local stockbrokers and Impellam (+4%) continued to claw back ground lost in the autumn.
Trading updates this week were limited to SThree’s preliminary results. Profits were in line with expectations but the group's January temp ‘return to work’ figure points to the strongest start to a year since 2006. Given that perm momentum is generally improving and consultant headcount has increased by around 10% in six months we thought management could have been more upbeat.
On a more personal note, I’ve managed to catch up with a couple of old friends from the industry over the past few weeks – Charles-Henri Dumon and Terry Benson. Dumon and other ex-Michael Page colleagues parted company with Page in 2012 and have recently resurfaced at a new business, privately-owned human resources consulting group Morgan Philips. Given its scale and the intended breadth of its geographical footprint, we don’t consider the business to be a competitive threat but it will be interesting to monitor its progress. Bonne chance.
See February’s Recruiter magazine, out next week, for an analysis of how two major staffing companies have come out ahead in share price and performance during the recessions.
After an initial wave of optimism in 2014, investors have become increasingly concerned about the sustainability of growth in emerging markets.
Doubts created by several months of slowing growth in China have been amplified by severe currency weakness in a number of emerging markets, particularly in those countries – Brazil, India, Indonesia, South Africa and Turkey – fortunate to be dubbed the ‘fragile five’ by economists. In response, some central banks have raised interest rates in an attempt to prevent further currency pressure and inflation. For the pessimists, this rekindles memories of the late 1990s Asian crisis.
Here in the developed world, economic news has been more positive. Wintery weather in North America has clearly had a negative effect (which I can understand as it hit -27 deg when I was in Chicago in late January) but the UK outlook remains optimistic. Nevertheless, Asian fears have weighed on sentiment and the FTSE100 index has declined by 5% over the past fortnight.
Within the recruitment sector, US shares once again underperformed their European peers with Manpower down 14% and Kelly Services by 9%. Matchtech (-9%) and Adecco (-7%) propped up the bottom of the table in Europe.
The leader board is headed by Staffline (+13%) due to better than expected results and a generous dividend hike. Elsewhere, USG (+10%) benefitted from upgrades by local stockbrokers and Impellam (+4%) continued to claw back ground lost in the autumn.
Trading updates this week were limited to SThree’s preliminary results. Profits were in line with expectations but the group's January temp ‘return to work’ figure points to the strongest start to a year since 2006. Given that perm momentum is generally improving and consultant headcount has increased by around 10% in six months we thought management could have been more upbeat.
On a more personal note, I’ve managed to catch up with a couple of old friends from the industry over the past few weeks – Charles-Henri Dumon and Terry Benson. Dumon and other ex-Michael Page colleagues parted company with Page in 2012 and have recently resurfaced at a new business, privately-owned human resources consulting group Morgan Philips. Given its scale and the intended breadth of its geographical footprint, we don’t consider the business to be a competitive threat but it will be interesting to monitor its progress. Bonne chance.
See February’s Recruiter magazine, out next week, for an analysis of how two major staffing companies have come out ahead in share price and performance during the recessions.
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