FTSE edges higher after rout with Legal and General leading the way

Discussion in 'Market News' started by Lily, Feb 9, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    Insurer reassures investors over its exposure to oil and gas sector

    With markets attempting a rebound after Monday’s rout and despite an overnight slump in Asia, Legal and General is leading the way.

    In the wake of the current market turmoil and “following a number of enquiries from....analysts and investors” the group has clarified its exposure on its bond portfolio, which seems to have reassured investors. Its shares are up 8.5p or 4% at 211.5p as it said only 1.2% of the portfolio was in basic resources and 5.2% in oil and gas. Investors have been concerned about the exposure of investment groups and banks to the commodities sector after the tumbling oil price and falling mining shares.

    In a move to allay fears in the market over its bond portfolio, Legals has set out an up-to-date split of its book as at the end of December 2015. The portfolio amounted to around £39bn at the end of the year, down from £40.7bn at the end of 2014. By credit rating, around 4% was AAA, 28% was AA, 33% was A, BBB accounted for 31% and the balance was BB or below – to us, this is a sign of the level of security within the portfolio and the conservative approach taken by the fund managers.

    These figures do not vary greatly compared to the end of 2014, with the extra detail offered being the breakdown of the ‘industrials’ line to separate ‘oil & gas’ and ‘basic resources’. Not only are these figures low, around 5% and 1% respectively, we believe them to be of strong quality. This disclosure should nail concerns in the market over this exposure.

    Thanks to the valiant late recovery on Wall St, investors are largely ignoring Asian market falls and pushing the share indices higher this morning. However, while the banks remain under pressure the next panic sell off could just be around the corner. Janet Yellen?s testimony this week will be under even more scrutiny than usual and those without the stomach for some extreme volatility may well be advised to take a back seat.

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