Market volatility is being driven by a hidden factor - the increased regularity with which companies are releasing their sales figures.
That is according to Richard Muckart, chief investment officer at Premier Asset Management and manager of the firm’s Premier Eastern Enterprise fund.
He says companies are becoming more Americanised by publishing their sales statistics on a quarterly or even monthly basis, as opposed to the common industry standard of every six months.
This, he adds, is causing greater market volatility as analysts react to the numbers.
While this would be fine for long-only products, the number of hedge funds and absolute returns funds in the market today means it is having a big impact.
“Having quarterly reports is adding to market volatility,” he says. “It’s all going the American way and analysts watch [sales figures] like hawks.
“It tends to be companies that have US influences. Perhaps they are doing a lot of business in the States or they have US subsidiaries.
“Some statistics are being thrown up almost monthly now. Lifestyle (a department store company in Hong Kong invested in by Premier) produces monthly numbers. It can lead to more volatility; things become slightly more short-term.”
Muckart says publishing monthly figures can lead to distortions which analysts and investment companies act upon hastily.
“A great example of the impact of this is the Chinese New Year,” he says. “If it falls in January, that month’s figures could differ a great deal from January the previous year because instead of 25 days trading there are only 20. There are regular holidays in Asia. It is similar here with our Christmas holidays.
“This is having an effect on investment companies because the market has changed. If you had long-only funds there would be no reason to react and volatility would not be affected. But with hedge funds and absolute return funds this would generate different patterns of trading which has an impact on markets.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Scott Sinclair on 020 7034 2636 or email [email protected]
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