Banks and miners lift FTSE 100 as global indices hit new highs, Standard Chartered up on outlook, dividend and buyback, and Frasers builds stake in Hornby

“Indices around the world are hitting record highs as the latest test for investor sentiment came and went in the form of Nvidia’s results,” says AJ Bell Investment Director Russ Mould.

“These managed to outmatch the market’s already elevated expectations, suggesting the AI theme is very real. However, how healthy it is for a single stock to have such a big bearing on global markets is questionable.

“The FTSE 100 made a steady start with miners and banks doing the heavy lifting following gains in Asia.

“The market may now be short of big catalysts until the middle of next week as the US reporting season begins to wind down, with core PCE (personal consumption expenditures) data from the US likely to be closely watched next Thursday given it is the Federal Reserve’s preferred measure of inflation.”

Standard Chartered

“Banking outfit Standard Chartered has always stood apart from its UK-listed peer group thanks to its emerging markets focus and its latest update sees the company standing out for the right reasons as investors are won over by a generous dollop of cash for shareholders and an encouraging medium-term outlook.

“If the company follows through on plans to return at least $5 billion over the next five years then it will have returned around a quarter of its current market cap in dividends and buybacks over that period.

“China remains a thorn in the side of the business for now as it announces further impairments relating to its investment in Chinese bank Bohai.

“Medium-term returns targets are ahead of where the consensus is sitting so if these can be delivered they could help lift the company’s valuation. However, its focus on developing economies brings with it a level of unpredictability which may get in the way of these aspirations.”

Hornby / Frasers

“Frasers has shunted its way up Hornby’s shareholder register, as it pounces on yet another retail name that’s been going through hard times.

“Phoenix Asset Management already owns 71.6% of the business and is helping Hornby through its Castelnau investment vehicle. Phoenix sees hidden value in the model trains-to-planes specialist and has used two businesses owned by Castelnau to make improvements to Hornby’s websites and digital marketing. Part of the strategy is for Hornby to develop direct relationships with existing and potential customers and to give greater individuality to its brands which include Scalextric and Airfix.

“These brands are well known to the older generation but Hornby has struggled to resonate with a younger audience, partially because its marketing has been ineffective and previous restructuring efforts have flopped. Profit warnings have been more regular than the number 8 bus to London Victoria.

“With such few shares freely traded on the market, Frasers will have only been able to get a block of 11.1 million shares from Phoenix or Artemis, the only other large shareholder on the register.

“While Hornby’s shares have struggled for years, they’ve recently started to perk up and the appearance of Frasers on the shareholder register has given them another boost.

“Don’t expect Frasers to launch a takeover bid for the group. Its style is to only acquire when something is on the verge of going bust as it prefers to pay pennies to buy something outright. Instead, Frasers is more likely to seek strategic conversations about helping Hornby to improve its distribution and logistics while at the same time realising it might be able to make a few quid by investing in its shares.

“At first glance, it’s not the most logical tie-up for Frasers which is best known for sporting equipment and athleisure. Train sets and tracksuits are about as far removed as you can get. Yet Frasers has shown willingness to explore different ways to get consumers to part with their cash. After all, it went from sporting equipment into sofas and computer games which is not a natural path to take.

“The real connection between Frasers and Hornby is the former’s GAME shops which have progressed from consoles and computer games to now also selling board games, trading cards and toys. Hornby’s products sit on GAME’s shelves and Frasers clearly spots an opportunity to do more.”

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