Old Mutual gets shafted

Johannesburg - Shares in dual-listed Old Mutual have fallen 7% as negative sentiment towards the UK banking and financial services sector persists.

This comes hot on the heels of Tuesdays 6% decline in Investec.

Market commentators are attributing the selling to negative comments towards the UK and its currency.

Highly rated investment guru Jim Rogers of investment firm Rogers Holdings told Bloomberg Television in an interview on Tuesday: "[The pound] is finished. I hate to say it, but I would not put any money in the UK."

The Japanese yen rose to a record high against the pound in late trade on Tuesday.

Stockbroker Sasha Naryshkine of Vestact told Fin24.com: "RBS went and spooked the market," referring to the announcement on Monday by Royal Bank of Scotland that it would report a full-year loss of about $40bn. The bank also had its long-term credit ratings cut on Tuesday by Moody's Investors Service.

Sean Riskowitz, a local investment manager at Manhattan Financial, cautions against viewing the sharp decline in Old Mutual and Investec as a buying opportunity.

Riskowitz said: "We've looked very carefully at these kinds of situations because naturally such significant declines in their share prices could present us with a buying opportunity. However, after reviewing the recent results of both companies and trying to arrive at an intrinsic value, we feel more clueless than [British Finance Minister] Alistair Darling!"

He also warned: "In terms of Old Mutual, the group is still heavily reliant on profits from South Africa so the argument that they are just a proxy of the UK market doesn't stand with me.

"I think Old Mutual in particular has serious capital problems. I don't think Mr [Old Mutual CEO Julian] Roberts knows what to do about that or the Bermuda book, which seems to keep popping up with more and more problems."

Riskowitz runs a number of private investment partnerships which specialise in investing in undervalued equities on the JSE.

Ferdi Heynecke, a stockbroker with Afrifocus, said: "It certainly appears that the international sentiment is weighing hard on our dual-listed shares on the back of bad UK banking sector news," adding "for the long term investor opportunities could arise if share prices become overly depressed, but the actual economic fundamentals could still take a long time to improve."

By midday on Wednesday, Old Mutual had fallen 7.6% (63c) to 767c while Investec had lost another 4.3% (145c) to trade at 3 240c.

- Fin24.com