Daily market update: Defence stocks, Shein, Anglo American, MONY Group

“European markets pushed ahead on Monday amid talk of greater defence spending, M&A activity and a series of important political meetings,” says Russ Mould, Investment Director at AJ Bell.

“Ukraine peace talks topped the agenda, while Chinese president Xi Jinping undertook a rare meeting with some of China’s biggest tech firms to boost business sentiment.”

Defence stocks

“Comments by secretary general Mark Rutte that NATO members will have to boost their defence spending by ‘considerably more than 3%’ of GDP put a rocket underneath defence stocks. BAE Systems jumped to the top of the FTSE 100 risers list as investors hoped its earnings prospects would be greatly improved. Mid-cap defence player Chemring also enjoyed a boost.

“Shares in defence companies had already rallied hard since Russia invaded Ukraine as investors took the view that the shocking events would spur governments around the world to fortify their own defences. Rutte’s comments effectively confirm this line of thinking and have acted as another share price catalyst, even though markets had already priced in a stronger earnings environment for the sector. That Donald Trump is keen for European allies to spend as much as 5% of GDP on defence adds to the narrative supporting the sector.”

Shein

“Reports suggest there is a cavernous gap between the $66 billion value of Shein from a fundraising exercise in 2023 and the potential $30 billion valuation that might be needed to get the IPO off the ground.

“It makes sense that investors want a discounted valuation for Shein before agreeing to back the IPO. There are so many risks involved with the investment case that investors will want a cut-price deal as compensation. Slashing the valuation gives the IPO a better chance of going ahead.

“Shein’s journey to floating on a stock market has been long and treacherous. There have been endless questions around working practices, governance, transparency and alleged intellectual property infringements that most companies would have given up on an IPO long ago. The fact Shein is still battling it out suggests it remains confident of getting enough investor support to list its shares.

“Unfortunately, just as it looked as if all the ducks were in a row, along comes another complication – and this scenario has played out many times over the past year or so.

“The latest twist to the story is Donald Trump targeting low-value parcels coming into the US that are currently not subject to taxes or fees. If Trump proceeds with his clampdown on import taxes, Shein faces the prospect of having its competitive edge diluted as its products would become more expensive.

“Until there is clarity on the matter there is no point Shein rushing through its IPO as investors will want to know the lay of the land.”

Anglo American

“There has been no messing around from Anglo American since it successfully fought off interest from rival mining group BHP last year.

“Anglo American has been busily transforming the business and it has firmed up plans for the demerger of platinum arm Amplats – in which it has a 67% stake.

“Shareholders now have a clear picture for how the process will work and there’s some additional good news that the wider group will benefit from a chunky dividend payment before the demerger takes place.

“The newly demerged entity will have a primary listing in Johannesburg but also a secondary listing in London too. The timeline is ambitious with plans for the process to complete in June after a vote in April.

“Tellingly, Anglo intends to ‘responsibly’ exit its remaining shareholding in the platinum business over time. Demand for platinum metals is still closely tied to use in catalytic converters, so the shift to electric vehicles represents a structural hit to demand.

“The upshot is a more streamlined Anglo American – largely focused on copper which is seen as having a key role to play in the energy transition as well as iron ore and crop nutrients.

“The market has rewarded the company for its shift towards a more focused strategy but another upshot is Anglo is now a more easily swallowable morsel for any potential bidder.

“BHP may have put its takeover plans on ice but others may emerge, assuming they are not put off by the higher share price.”

MONY Group

“Moneysupermarket owner MONY Group had plenty of good news to grab investors’ attention including record full-year revenue and adjusted earnings, a hike in the dividend, a bumper buyback and a return to net cash.

“Households are under pressure to watch every penny and using comparison sites is a must for many people. This remains a competitive industry where marketing costs are a significant outlay, but MONY is gaining some traction in signing people up to its SuperSaveClub – offering customers free days out and other benefits.

“This is a cheaper route to securing customers and also makes them sticky. It now represents a meaningful portion of overall business.

“There were some less-positive signs, particularly looking at performance in the final three months of 2024, where growth in its key insurance segment slowed significantly. Specifically, the company does note a snarl-up in the car insurance switching market but the diversified nature of MONY’s offering means opportunities elsewhere could compensate.

“The market will also take some comfort from the group’s insistence any cost inflation can be mitigated through further efficiencies.”

Springfield Properties

“It might be a minnow among the UK-listed housebuilders, yet Springfield Properties took the market by storm after saying profit would be significantly ahead of market expectations. Housebuilders are as active buying plots of land as they are building homes – it’s all about laying the foundations for future earnings.

“Springfield has taken a slightly different approach this time by selling land rather than building on it. It has sold a block of land in Central Scotland to Barratt that not only boosts earnings, but also helps to pay down debt and represents a strategic shift to now focus on the North of Scotland. The sale looks strategically and financially to be a clever move.”

These articles are for information purposes only and are not a personal recommendation or advice.