Tuesday 04 June 2019
BUSINESS DAY
43
FINANCIAL TIMES
COMPANIES & MARKETS
@ FINANCIAL TIMES LIMITED
FCA probes Citigroup links in insider dealing case
Regulator passed new information during trial of Walid Choucair and Fabiana Abdel-Malek BARNEY THOMPSON
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he UK’s financial regulator is investigating alleged links between a Citigroup employee with access to “price-sensitive information” and a multimillionaire trader who has been named in connection with an insider dealing trial, a court has been told. The Financial Conduct Authority was passed information this month that the Citigroup employee spoke to an intermediary of Alshair Fiyaz, a trader who owns the St Tropez polo club, Southwark Crown Court heard on Monday. The FCA has identified an individual who is “consistent” with the profile of the employee, using the tip-off and other information, such as telephone contact. The claim emerged during the trial of Walid Choucair — once a friend and associate of Mr Fiyaz — and Fabiana Abdel-Malek, a former compliance officer at UBS. Mr Choucair and Ms Abdel-Malek are both accused of insider dealing in relation to five attempted mergers between June 2013 and June 2014. The FCA alleges that Ms AbdelMalek would access confidential information on deals UBS was working on and pass them to Mr Choucair. He would trade on that information and bet that the share prices of the target companies would rise, netting £1.4m in profit.
The pair deny the charges. Insider trading carries a maximum seven-year sentence. Mr Choucair instead said he was prompted to trade by sharing ideas, legitimate market colour and information from journalists with an informal network of traders, including Mr Fiyaz. The court had previously heard that the defendant and Mr Fiyaz would talk nearly every day to discuss potential investments. Mr Fiyaz has not been charged with any offence and is not named on the FCA’s indictment, He was not in court to respond to the evidence the court heard on Monday. The FCA received the information about the possible Citigroup source on May 14, in the middle of the trial, the jury heard. The regulator approached Citigroup several days later to make inquiries about two of the mergers in question. Asked by his lawyer, Richard Wormald QC, on Monday whether the fact that Mr Fiyaz “may have had an insider” at Citigroup supported his version of events, Mr Choucair replied that it “potentially provides an explanation” as to the true source of his ideas for placing trades. In particular, Mr Choucair went on to describe a meeting between him and Mr Fiyaz at the Four Seasons hotel in London in July 2014, at which they discussed the potential takeover of Targa Resources, another of the five attempted takeovers that are central to the trial.
Alphabet shares slide on Google antitrust probe News of tougher line from US regulators also hits other tech stocks MAMTA BADKAR
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ech stocks were dragged lower on Monday led by Alphabet, which briefly fell into bear market territory as the US justice department prepares an antitrust investigation into Google raising fears of regulatory scrutiny for the sector. Shares in Alphabet, Google’s parent tumbled as much as 6.7 per cent to $1,032.04 falling to the lowest in five months and down 20.4 per cent from its April high of $1,296.97. Bear markets are defined as a 20 per cent decline from a recent peak. At pixel time the stock trimmed its losses to trade 6.2 per cent lower. The justice department recently won jurisdiction for a probe into the company from the Federal Trade Commission. Google’s rivals have long lobbied the US antitrust enforcers to take action against the company. The FTC previously investigated Google for possible antitrust violations but settled in 2013 without taking major action against the company. Kevin Rippey, an analyst at Evercore ISI, said while the new antitrust investigation is “unlikely to reverse the previous investigation’s findings as it relates to search” its Android and app
store could come under scrutiny. “We believe this could be an area where US investigators take a much closer look than previously, given the now far greater importance of the mobile ecosystem vs 2011,” he added as he cut his price target on the stock by 4 per cent to $1200. Fears of regulatory probes also hit other big tech names like Amazon, which fell 3 per cent to $1,718.81, while Facebook tumbled 4 per cent to $170.60, Netflix slid 1.5 per cent to $337.98. Apple was the only Faang stock to buck the decline and traded 0.7 per cent higher. The broader NYSE Fang+ Index, which includes the original Fang stocks along with others high profile tech names like Twitter, Tesla, Nvidia and Alibaba, declined 1.9 per cent. In contrast however, chipmakers rallied on Monday with the S&P 500 semiconductors and equipment index up 1.4 per cent. The gains were underpinned by a 6 per cent jump in Advanced Micro Devices after it announced a multiyear partnership with Samsung. The sector’s advance on Monday a 17 per cent tumble in May when trade fears dragged chipmakers lower. www.businessday.ng
Walid Choucair, above, and Fabiana Abdel-Malek are both accused of insider dealing in relation to five attempted mergers between June 2013 and June 2014 © Bloomberg
Stocks stable, bonds climb as trade tensions escalate PHILIP GEORGIADIS AND ALICE WOODHOUSE
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S and European shares were stable as sentiment in equity markets improved throughout Monday despite a wider rush for safety as government bonds and other haven assets rose amid escalating economic tensions between the US and China. The S&P 500 traded 0.2 per cent higher soon after the opening bell, while the composite Stoxx Europe 600 recovered from earlier loses to trade flat. Stocks suffered their worst month of the year in May as trade tensions amplified global growth concerns, sending investors piling into the government bond market. US sovereign bonds continued their rally on Monday, with 10year Treasury yields briefly falling below 2.1 per cent for the first time since 2017. China stepped up its counter-
offensive in the trade conflict over the weekend, announcing it would establish a blacklist of foreign companies that harm the interest of Chinese groups, while separately state media reported that Beijing was investigating FedEx. “The series of actions over the weekend means that China’s ‘long march’ has begun,” said Iris Pang, economist on Greater China for ING. “We take this seriously. It means that the trade war has not only become a technology war but also a broad-based business war.” On Monday, the stand-off spilled into other sectors, as China’s Ministry of Education issued a warning to students and scholars who plan to visit the US. European banks suffered, as low interest rates typically impact their profitability. The Stoxx index tracking the sector fell nearly 1 per cent to leave it more than 20 per cent lower this year, with Deutsche Bank hitting a new record low. Japan’s Topix was down 0.9 per
cent to its lowest level since the start of January, while Australia’s S&P/ASX 200 shed 1.2 per cent. Hong Kong’s Hang Seng index was flat, and the CSI 300 of Shanghai and Shenzhen stocks rose 0.1 per cent. Concerns over trade tensions spread beyond equities markets. The yen, which is seen as a haven in times of uncertainty, was flat on the day but holding around its strongest level against the dollar since mid-January, and gold climbed 0.8 per cent to hit a twomonth high. Investors reacted with dismay at the end of last week when Donald Trump opened up another trade front by threatening tariffs on Mexico over migration. Neil Mackinnon, global macro strategist at VTB Capital, said: “Policy volatility translates into market volatility and, not surprisingly, incentivises real-money investors to adopt defensive portfolio decisions.”
Kier profit warning sends shares tumbling 40% Pressure mounts on construction business and restructuring costs spiral GILL PLIMMER AND PHILIP GEORGIADIS
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hares in Kier plunged 40 per cent on Monday as it warned that profits would be about £40m lower than expected, adding to fears over the health of the UK outsourcing and construction sector. In an unscheduled trading update, Kier said it expected underlying operating profit for the year to June 30 to be £40m lower than analyst estimates of £169m. It also warned that net debt would be significantly higher than expected, raising concerns that the company would need to sell assets or launch a second rights issue just months after investors shunned a £264m emergency cash call. The announcement sent shares in Kier tumbling to 158.6p in early trading — its lowest level in almost two decades. John Moore, senior investment manager at Brewin Dolphin, said the company was in “a dark place”. “At the turn of the year the business set out its financials, trading performance and future plans
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as part of its unsuccessful rights issue, only to now say that this information was largely wrong. It has broken trust with investors, which does not bode well,” he said. Kier has annual revenues of £4.5bn and employs more than 20,000 people at its construction and support services divisions. It has contracts for Britain’s highspeed rail project, and the Highways Agency, as well as collecting rubbish for local authorities. The group ran into trouble after ramping up debt through a series of acquisitions including Mouchel, May Gurney and McNicholas. The strategy, aimed at boosting revenues, has already felled other contractors including Carillion, which collapsed last year. Rival government supplier Interserve is in the hands of its creditors, Amey has been put up for sale by owner Ferrovial, while Mitie and Capita are seeking to rebuild following a series of profit warnings. Kier is under new management after Haydn Mursell was forced to quit as chief executive following the botched rights issue. Andrew Davies, who had been lined up as @Businessdayng
a successor to take over Carillion before it collapsed, joined from Wates as chief executive in March and is midway through a strategic review. The findings should be set out on July 30, the company said. Kier said revenue growth at its building division would be lower than forecast, knocking £25m off its operating profit, while costs from a restructuring programme would be £15m higher than expected. This year Kier had to revise up its net debt by £50m as at December 31 to £180.5m after an “accounting error”. In March it reported a first-half pre-tax loss and slashed its interim dividend. Its rights issue at the end of 2018 left banks and brokers nursing losses after they were forced to take up the stock. Stephen Rawlinson, analyst at Applied Value, said Kier’s update failed to provide sufficient information to evaluate the business “financially or strategically”. “They don’t know where the bottom is yet, that’s the problem,” he said. “The story is about simplification, but it’s not yet clear what that means.”