Renée Bonorchis
25 July 2008
Johannesburg — A DAY after suggesting Investec directors were guilty of insider trading and questioning Investec Asset Management's calculations on inflation, trade union Solidarity said yesterday it was now convinced insider trading had not taken place, and that the asset manager's numbers were statistically correct.
Solidarity, which got some of its facts wrong on Monday and had not spoken to either of the Investec bodies before issuing its first statement, could have been sued by the financial firms for defamation.
"We are prepared to say that we really hope the people concerned did not suffer any damage," Dirk Hermann, deputy secretary-general of Solidarity, said last night.
At the heart of the issue is a press release Investec Asset Management issued on Tuesday night last week. The company said it had analysed inflation data, and concluded that SA's inflation was lower than the official statistics and that interest rates could also be lower.
On Wednesday last week, all local bank stocks rose. Some of this move was put down to Investec Asset Management's "good news" on inflation. But at the same time the US said it would bale out mortgage lenders Freddie Mac and Fannie Mae and surprisingly upbeat results from San Franciscan bank Wells Fargo lifted all financial stocks.
Nonetheless, Solidarity noted that five weeks before the press release, Investec directors Bernard Kantor and Stephen Koseff bought European call options. This type of futures contract allows the holder to buy the underlying share (Investec) at a given price on a set date in the future.
Solidarity questioned the timing of this, and wanted the Financial Services Board to investigate insider trading.
But Hendrik du Toit, CE of Investec Asset Management, and Koseff, CE of Investec, said yesterday neither of them had seen the press release before it was published, and that the two companies operated independently of each other.
"I was going long. The share was oversold. We had just released good results. The share went up, and then it came down again," Koseff said yesterday. He said Solidarity's statements were "absurd".
Nonetheless, with the insider trading issue behind them, Investec and Solidarity were due to speak again soon.
Although the union now thought Investec Asset Management's figures on inflation were statistically correct, Hermann said they were not a true reflection of current inflation.
"It influences all of our wage negotiations with companies," Jaco Kleynhans, spokesman for Solidarity, said. "Kumba said it doubted current inflation because of Investec Asset Management, and that's a problem. "
He said the union supported lower inflation and interest rates, but it had to negotiate with the official numbers. The union did not talk to Investec first, just as Investec Asset Management had not talked to the treasury or the central bank before issuing its statement.
Du Toit said: "We can't talk to government all the time because then we become insiders, and we can't trade if we're too inside. It was an opinion. We believe in a transparent market."
While the press release may not have moved the equity market, it did move the bond market. Du Toit said the release explained to the market why his company was holding more bonds than others.
"The portfolio managers acted on public information, and were maybe analysing it a little more than their competitors, and they stated their position clearly ... If we see apparent value in a market and don't act on it then we're breaching our fiduciary duty," Du Toit said.
Investec has agreed to take part in Solidarity's conference on inflation, due to take place in two months. Hermann said the debate on how inflation numbers were based would continue because SA's inflation basket was out of date.
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