CFD Traders Diary
Wild action in RBS as the rights issue is announced
22/4/2008
There was huge volume in RBS early on as traders digested the implications of today's big fundraising news. The bank will offer shareholders 11 new shares for every 18 existing shares at 200p each, which is a big discount to the current price. The issue is fully underwritten and RBS unveiled new write-downs of £4.3bn after tax, but said its underlying performance had remained satisfactory. We cannot help thinking that an overhang of £12bn worth of stock, not to mention the possibility of more fundraising in the sector, will keep the lid on bank shares in the short term, so CFD traders should be looking for more shorts here.
At the top end, the miners were again in good form with Kazakhmys, Rio Tinto and Cairn Energy sharply higher as oil and metal prices continue to look solid, but we would caution against chasing them at this stage, as there is a distinct lack of heavy buying volume here.
There was good news for holders of FDKI today as engineering group Melrose agreed to take it over for 81.3p in cash and shares with a 3p dividend to come. The shares are now at 86p, which suggests that there is other interest around, and our advice here would be to sell half of holdings and run the rest in case the likes of Blackstone show their hand.
