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Market Volatility

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Market Volatility How Risk Management Relates to Investor Expectations. PRESENTED BY JASON STOKES, SALES MANAGER, CORPORATE. 6th DECEMBER 2011 – PowerPoint PPT presentation

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Title: Market Volatility


1
Market Volatility How Risk Management Relates
to Investor Expectations
  • PRESENTED BY JASON STOKES, SALES MANAGER,
    CORPORATE
  • 6th DECEMBER 2011

2
REUTERS/University Of Essex
LIGHTNING IN ALBUQUERQUE
3
REUTERS/University Of Essex
EARTHQUAKE IN CHILE
4
REUTERS/University Of Essex
NATURAL DISASTERS
5
MARCH 2011
6
REUTERS/Brendan McDermid
EUROZONE FINANCIAL CRISIS
7
SEPTEMBER 2011
8
REUTERS/Brendan McDermid
CYBER ATTACKS.
9
AUGUST 2011
10
REUTERS/Molly Riley
REGULATORY CHANGES AND GOVERNMENT POLICY
11
REUTERS/Regis Duvignau
ANTICIPATING THE NEWS AND PLANNING, WHATS NEXT?
12
WHATS NEXT?
13
(No Transcript)
14
THE PAST 5 YEARS VOLATILITY V CHANGE
15

16
THE IMPORTANCE OF MANAGING YOUR INVESTORS
  • SPELT Risks abound, but specifics include
  • Currency fluctuations
  • Predatory MA activity
  • Funding and debt
  • Market perception
  • Regulatory

17
SP/ASX 20 Accumulation index lt.ATLIAgt to proxy
firms with Good risk management (Safe Firms)
SP/ASX Small Ordinaries lt.AXSOAgt to proxy firms
with less risk managements (Risk Firms).
Add the Volatility Index lt.VIXgt
Spread chart of the two returns, which represent
how much the Safe Firms outperform the Risk Firms
(Outperformance).
When there is a spike in the VIX, Safe Firms
outperform more than those times when market is
less volatile.
SOURCE THOMSON REUTERS EIKON
18
UNDERSTANDING YOUR INVESTORS
19
TOP 20 HOLDERS ON A SHARE REGISTER
  • Do you know who owns your company?
  • Can you name the Top 10 Investors?
  • More importantly, do you know why theyre holding?

20
THE SHARE REGISTER ANALYSIS PROCESS
  • Most registers dominated by nominees or
    custodians e.g. HSBC Custody Nominees, JP
    Morgan Nominees
  • Majority of institutions hold through nominees
    and therefore hidden / unidentified
  • Obtain a copy of the register and identify
    registered holders holding stock as nominee or
    custodian for other parties
  • Send s672A disclosure requests to nominees
  • Issue disclosure requests to sub-nominees
  • Analyse information to unveil fund managers and
    beneficial holders

21
THE SRA PROCESS - LEGISLATION
  • 672A  Disclosure notices
  • (1)  ASIC, a listed company or the responsible
    entity for a listed managed investment scheme,
    may directunder section 672B as having a
    relevant interest in, or having given
    instructions about, voting shares in the company
    or interests in the scheme
  • to make the disclosure required by
    section 672B.
  • A person has a relevant interest in securities if
    they
  • (a) are the holder of the securities or
  • (b) have power to exercise, or control the
    exercise of, a right to vote attached to the
    securities or
  • (c) have power to dispose of, or control the
    exercise of a power to dispose of, the
    securities.
  • It does not matter how remote the relevant
    interest is or how it arises. If 2 or more people
    can jointly exercise one of these powers, each of
    them is taken to have that power.

22
THE SRA PROCESS - LEGISLATION
  • Other relevant sections
  • information must be given within 2 business days
    (s672B(2))
  • prescribed fee payable per notice issued
    (s672B(2)(c), s672D)
  • register of information about relevant interests
    must be kept and can be inspected or a copy
    requested (s672DA)

23
SAMPLE RESULTS OVERVIEW
  • Thomson Reuters identified 302 institutional
    shareholders holding 148,202,219 shares across 24
    countries. This represents 26 of the shares
    outstanding or 65 of the free float. Overall,
    the number of shares held by institutional
    investors has increased by 2.7 million shares, an
    increase of 2 compared to the previous quarter.
  • The top ten investors remained fairly stable with
    only 2 new entries UBS Global Asset Management
    (Switzerland) and Amundi Asset Management. This
    Paris-based, Growth investment advisor has been
    buying XYZs shares since December 2008 and has
    increased its position by 470.
  • London based hedge funds are the main sellers
    over the last three months as hedge funds overall
    decreased their exposure to the stock by 24.
  • Value investors remain the leading investment
    style group, followed by growth and index
    investors.

23
SOURCE THOMSON REUTERS SHARE REGISTER ANALYSIS
24
INVESTOR STYLES
  • Hedge Fund
  • Income Value
  • Index
  • Momentum
  • Sector Specific
  • Specialty
  • VC/Private Equity
  • Yield
  • Investment Styles
  • Aggressive Growth
  • Broker Dealer
  • Core Growth
  • Core Value
  • Deep Value
  • Emerging Markets
  • GARP
  • Growth

25
INVESTOR TARGETING ANALYSIS
  • Identifying prospective investors with the
    greatest propensity to hold your stock company
    hence maximising management time
  • Utilise information to organize investor
    roadshows
  • Use this as a screening tool to filter meeting
    requests
  • Compare your shareholders against the
    shareholders in peer companies using information
    obtained under s672DA register of information
    about relevant interests
  • Access publicly available information on
    institutional shareholdings in companies
    worldwide

26
SAMPLE INVESTMENT STYLE ANALYSIS
32
  • Over the last 3 months value investors increased
    by 20.6 and strengthened their position as XYZs
    largest investment style group, as they currently
    account for 27 of the total shares identified.
    The sharp raise of value investors should be
    analyzed in consideration of the fact that 77 of
    the increase is accountable to the large buying
    from UBS Global Asset Management (Switzerland).
    As we discussed, this is the result of the
    internal reshuffling of XYZs shares amongst
    different division of the UBS group rather than a
    genuine buying motivated by current favorable
    stock valuation.
  • Index investors decreased their exposure to the
    stock by 8, declining at a similar pace observed
    during the previous quarter when index investors
    sold overall 7 of their stake. This is not
    surprising given the fact the XYZs share price
    dropped 5.3 over the last three months and it
    underperformed the FTSE MIB index by 4 in the
    same period. It is also interesting to note that
    the US based BlackRock Institutional Trust
    Company and BlackRock Advisors (UK) Limited
    decreased their respective holding exactly by
    8.7 whilst the corresponding subsidiaries of the
    State Street group decreased their positions by
    around 4.5.

26
SOURCE THOMSON REUTERS SHARE REGISTER ANALYSIS
27
HOLDERS BY GEOGRAPHY
27
28
MANAGEMENT REPORTING
  • Boards are elected by investors and naturally
    have an interest in investor sentiment
  • Qualitative measures include
  • Report top holders (beneficial / underlying)
    rather than top registered holders (typically
    nominees)
  • Report major movements on the register
  • Share price performance and trading activity
  • Retail vs institutional splits and changes
  • Qualitative comments
  • Investor feedback from meetings
  • Market commentaries
  • Broker comments
  • Act as the conduit for information flow between
    the market and the company

29
CORPORATE GOVERNANCE / AGM
  • Understanding your investors will be the basis
    for a successful outcome at the companys Annual
    General Meeting (AGM)
  • Ensure the dissemination of meeting information
    to the underlying investors and not merely to the
    nominees
  • Consider soliciting investor support through
    proxy votes particularly where voting exclusions
    or contentious resolutions are being considered
  • Engage with shareholder groups (ASA, corporate
    governance advisors)
  • Remember Investors control the outcome of a
    meeting shareholder activism and corporate
    governance is on the agenda

30
UNDERSTANDING THE MARKET, MARKET VOLATILITY, AND
BEING PROACTIVE
31
GET THE HEADS-UP
    EQUITIES     NEW YORK - U.S. stocks ended
flat on Friday but capped the best week for Wall
Street bulls in almost three years after data
showed the U.S. unemployment rate dropped to a
2-1/2 year low.     The Dow Jones industrial
average .DJI dipped 0.61 point, or 0.01 percent,
to 12,019.42. The SP 500 .SPX shed 0.30 point,
or 0.02 percent, to 1,244.28. The Nasdaq
Composite .IXIC edged up 0.73 points, or 0.03
percent, to 2,626.93.     For a full report,
double click on .N     - - - -     LONDON -
Britain's top shares posted their highest weekly
percentage gain since January 2009, buoyed by
central banks' moves to boost liquidity and
prospects for next week's key summit to tackle
the euro zone debt crisis.     The FTSE 100
.FTSE closed up 62.95 points, or 1.2 percent, at
5,552.29, bouncing back after Thursday's 0.3
percent slip in the wake of Wednesday's 3.2
percent jump. Over the course of the week, the
index firmed 7.5 percent.     For a full report,
double click on .L     - - - -     TOKYO - The
Nikkei average extended gains to log its biggest
weekly advance in two years on Friday, though the
mood was far from upbeat given uncertainty over
whether Europe will next week manage to cobble
together steps to counter the debt crisis there.
    The benchmark Nikkei .N225 added 0.5 percent
to 8,643.75, for a weekly gain of 5.9 percent,
its biggest since the first week of December
2009. In one positive technical sign, the Nikkei
stayed comfortably above its 25-day moving
average, at 8,573.     For a full report, double
click on .T     - - - -     SYDNEY - Australian
shares are likely to open steady on Monday,
holding ground following a 7.6 percent jump last
week ahead of a European Union summit, while
encouraging data showed U.S. unemployment fell to
a 2-1/2-year low.     Stock index futures YAPcm1
slipped 0.1 percent to 4,295.0, a 7-point premium
to the underlying SP/ASX 200 index .AXJO. The
benchmark rose 1.4 percent on Friday, capping the
strongest weekly gain in three years.     - - -
-         
32
THE VIX IS A GOOD EARLY (ISH) INDICATOR
SOURCE THOMSON REUTERS EIKON
33
ALSO ITRAXX CDS INDEX
SOURCE THOMSON REUTERS EIKON
34
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35
(No Transcript)
36
(No Transcript)
37
CARBON TRADING
SOURCE THOMSON REUTERS EIKON
38
KEY TAKEAWAYS
  • You cant control the market volatility, but you
    can mitigate the risk and outperform your peers
  • Understand your Investors
  • Current holders model focusing on opportunity
    and risk in your existing shareholder base, and
    understand what their drivers are
  • New purchasing model focusing on investors with
    no current equity holdings in your company,
    targeting those that suit your fundamentals
  • Monitor the issues, and be proactive with your
    stakeholders, especially with any change in your
    fundamentals

39
Jason StokesThomson Reuters
CorporatePhone 61 2 9373 1948Mobile 61 402
851 923Level 10, 60 Margaret St Sydney NSW
2000jason.stokes_at_thomsonreuters.com
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