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Steer stays short of Standard Chartered as Buxton buys more

Steer stays short of Standard Chartered as Buxton buys more

ArtemisTim Steer shorted Standard Chartered before share prices plummeted by up to 24% on Tuesday, while SchrodersRichard Buxton has bought more of the shares on price weakness.

Steer, manager of the Artemis UK Growth fund, said he was short the bank before New York regulators accused Standard Chartered of around $250 billion worth of illegal dealings with Iran, although he said the position was ‘expensive’ versus others.

Stephen Yiu, assistant manager on Steer’s fund, told Wealth Manager they doubled their short position in Standard Chartered early on Tuesday morning, before the price collapsed by around 24%. The managers then closed out half of that position, keeping the other half on due to the level of uncertainty surrounding the situation.

‘We shorted this stock a while ago, based on concern over Asia,’ said Yiu. ‘Given all the other incidents we’ve witnessed, such as JP Morgan and Barclays – you have to ask how many details do they actually know? It’s quite difficult to know, so we have only taken off half the position.’

In contrast, Richard Buxton, manager of the £2.7 billion Schroder UK Alpha Plus fund and head of UK equities at the firm, told Wealth Manager: ‘There was a ludicrous over-reaction. If you read Standard Chartered’s very clear statement on Tuesday morning and if you trust the management - which I do – it’s crystal clear they say there’s $14 million of transactions, not $250 billion, where ‘we put our hands up and said we screwed up.’

 

‘But they are not going to lose their licence.' He said HSBC admitted earlier in the year they were involved in money laundering for drug runners and that there was a fine, but no loss of licence.

Buxton added: ‘It was crystal clear there were discussions with five regulators and one has broken ranks. You only need to know the politics of the situation – because it’s a bank, because it’s in the US and because there are politics involved – you can see how [people] come out with doomsday scenarios.’

Banks have clearly been 'tarnished across the board,' said Buxton, although he highlights that shares are up this year, with Lloyds up around 22% year-to-date, RBS up 14% and Barclays up a little.

'Standard Chartered is off 3% but that’s because of this week,' he added. 'For all the loathing exhibited to this sector, it’s not going down anymore.'

In order to snap up more shares of Standard Chartered after the bank’s share price plummeted on Tuesday, Buxton sold out of some of his holdings in GlaxoSmithKline.

 

Buxton said, at the 10th anniversary of his fund, that Standard Chartered was the one stock he had owned since the fund launched.

But for detractors of Standard Chartered who believe the latest debacle could indelibly impact the firm, Buxton said companies can suffer from large set-backs, to re-emerge even stronger.

The manager cited Rolls Royce as an example of when Qantas announced planes were grounded and how the share price of Rolls Royce is now well above its level before then.

Barclays is another example of a bank that Buxton bought on weakness, with its share price now at the level it was on at the start of January this year.

Buxton added to his position in Barclays the moment Bob Diamond resigned, in the view his departure marked ‘a clear catalyst for change.’

Standard Chartered was hit with accusations on Tuesday it had operated as a rogue institution, exposing the US financial system to ‘terrorists’ and ‘drug kingpins’ by working for the Iranian government for 10 years.

The bank has taken advice on whether it can take legal action against the US regulator for the accusations, in the view there could be a case for claiming reputational damage.

Over three years until the end of June, the Citywire Selection UK Alpha Plus fund has delivered 46.54% versus the FTSE 100 Total Return’s 45.69%.

On Artemis UK Growth, Steer has returned 46.03% versus the same benchmark.

 

 

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Tim Steer
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70/151 in Equity - UK (All Companies) (Performance over 3 years) Average Total Return: 53.19%
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