You are currently browsing the daily archive for November 14, 2008.

Follow up on our HSBC call of October 12th:

Recent negative newsflow for HSBC (HSBA, 702p) is now mostly in the price.

‘The extent of the slowdown in the Chinese economy became clearer on Thursday when the government disclosed that the rate of increase of industrial production had dropped to the lowest level in seven years’ (Source- November 13th 2008).

The FT goes on to say ‘Four days after unveiling a massive fiscal stimulus programme, the government said that industrial production increased by 8.2 per cent in October – well below forecasts’.

I suspect that the market now knows much (if not all) of what the HSBC directors knew back in early October when they sold their shares (see followthedirectors comment of October 12th ‘ HSBC- Directors Sell- ‘Credit tightening’ now hitting China growth’).

In the four weeks since our October 12th comment, HSBC are down 10% while the FTSE 100 is up 9%.

For all our comments on HSBC click here.

Rats come to mind whenever Rentokil is mentioned. And now sinking ships lurch in from stage left.

Rentokil (RTO, 44p)  announced yesterday that on November 13th David Liu, the Divisional Managing Director of Asia Pacific, had bought 130,000 shares at 45.5p (possibly to crystallise a loss), and sold 210,000 shares at 45.5p, leaving him with no position in the ‘Royal Rat Catcher’. Liu joined Rentokil from Aegis in 2005.

Directors sales at Rentokil have been few and far between. In fact the only independent sale (not connected to an options exercise) was by non exec Peter Bamford in October 2007, when he sold 10,000 shares at 168p. Though he still holds 38,000 shares.

Executive directors purchases over the last three years carry very little weight.

Rentokil recently announced third quarter results with an update on cost cutting/restructuring progress (Telegraph comment here).

I suspect trading conditions for a service company like Rentokil can only deteriorate in this environment.

View on Rentokil- Negative- PDMR selling

Strength of Signal- Weak


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November 2008