Rising tide lifts Welsh shares

Rhys David notes that some but not all Welsh shares have benefited from renewed investor confidence

A rising tide in March lifted the stock exchange, with shares touching 22 month highs in the period immediately after Easter, encouraged by the fact that the increasingly pointless phoney war between the parties in Britain will finally be settled with an election on May 6th.

Whether that enthusiasm will last much beyond the election remains to be seen and could depend a lot on how the incoming Government tackles the budget deficit and the rising national debt burden and the effect that has on confidence and, in particular,  bond prices. If these rise because international creditors demand a higher risk premium for buying UK gilts, shares will suffer. Some weakening in share prices already began to manifest itself in the first few days of April.

For some Welsh shares the good times were definitely back in March. As of March 31st, the date at which the prices of all the shares in this index were taken, Admiral Insurance, Wales’s sole representative in the FTSE top 100 and the biggest Welsh-quoted company by a country mile, were riding near an all-time high at £13.32, an 8 per cent increase over the month and a rise of 26 per cent over the five months since the index was started in November.  Further gains were made in the next few days on reports from analysts that the company, which announced an increased dividend last month, was continuing to make market share gains at the expense of rivals in the highly competitive insurance sector.

Admiral’s performance has been easily outstripped, however, by Pure Wafer, the chip maker, which rose by 46 per cent from 5.14p in March to 7.5p completing a doubling in value in the past five months, admittedly from a very low base of 3.75p. The company’s share price which less than a year ago reached 10p remains volatile, falling back again over recent weeks to around 6p.

The title of best  overall performer still remains, however, with little-known Cardiff oil and gas exploration company, Amerisur Resources. Its share price is up 114 per cent over five months at 16.5p, despite a small reduction between March and April. For those lucky enough to spot its potential, a total of £100 invested in November in the company, which searches for oil in South America, would now be worth £213.

The mid-Wales agricultural supplies business, Wynnstay, also experienced a slight fall in its share price  in March but it remains 15 per cent ahead of its November figure. The company has a growing involvement in the market for pets supplies – a sector that is growing fast as Britain’s population of dogs and cats continues to expand with rising affluence. It acquired 16 shops trading under the Pets at Home name and plans to open more. The shares reached a highest ever 280p in mid-March after falling as low as 180p earlier in the previous year.

Other gainers during the month were Cardiff media independent, Boomerang, which rose a modest 3.3 per cent to 90p, on news of a £4m contract win with S4C. The company also supplies programmes to other broadcasters including the BBC’s CBBC. Boomerang’s price is still down by just over 5 per cent on its November figure of 95p, however. Redrow, shares in which have roller-coasted over recent months, was up by 4 per cent over the month, though down by a modest 2.6 per cent over the longer period. Now back under the control of founder, Steve Morgan, the company is switching away from apartments to higher value properties.

Outside this group, however, the performance of the other shares in the index has proved disappointing, with the wooden spoon remaining firmly in the hands of Swansea lighting specialist, Enfis. Shares in the company, which operates from the city’s Technium, fell a further 23 per cent in the month, the fifth successive monthly fall, taking the cumulative reduction in value since November to 81 per cent. £100 invested in the company five months ago would now be worth £19. The company reported losses during the month, up from £1.89m to £2.09m and significantly lower revenues.

Other companies on a downward path include Finsbury Food, off a further 2.5p or 13.2 per cent in March and down 31 per cent since November. Finsbury, Britain’s second largest cake maker, with contracts for own label cakes with a number of big supermarkets, is reporting a 11 per cent decline in cake sales in the first eight weeks of 2010 which it blames on customers trading down and taking advantage of supermarket offers. At International Greetings the share price is 20 per cent down over five months, and at Moneysupermarket.com, it is down  a further 3.8 per cent in March and 11 per cent over five months.

Technology company IQE ended the month virtually unchanged at 16.25p but is also down around 11 per cent over the longer period. IQE, which supplies advanced semiconductor wafer products to the semiconductor industry, reported record revenues in the second half of the year as worldwide in demand rose following destocking in the first half.

The final constituent of the index Welsh Industrial Investment Trust is due to be wound up so that cash can be returned to its shareholders. As a result a new constituent of the index will be included next month.

The net effect of these wide variations in performance by Welsh businesses at a time when share prices generally have been advancing has been a 7.2 per cent rise in the portfolio over the month to £1,302 (against the original notional spend of £1,200) compared with a less impressive gain of 4.8 per cent in the FTSE 100, a 9.3 per cent rise in the FT Mid Cap Index and a rise of  5 per cent in the FTSE Aim All Share Index. Over the full five months the Welsh index has grown by 8.6 per cent compared with12.1 per cent for the FTSE100, 15.6 for the FT Mid Cap Index and 9.4 per cent for the FTSE Aim market. Investors in the Welsh portfolio over the full period under review would have lost money on seven of the shares picked, with only five –  Admiral, Amerisur Resources, Pure Wafer, Wynnstay and Welsh Industrial Investment Trust – showing an increase in capital value. May will mark the index’s six month.- time for a more detailed examination of just how well an investor with an all-Welsh portfolio would have fared since the index was created.

Rhys David is former Financial Times journalist and now writes on economic and business issues. He is a trustee of the IWA where he was development director from 2002-2008.

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