Over 40 years’ heritage
185,800 clients worldwide
Over 15,000 markets

QBE into a trading halt

QBE has been placed in a trading halt pending the release of an update for its North America assets.

This will be a profit downgrade, the word on the street is reinsurance costs continue to move up and the synergies QBE was expected to find from its North American assets are have yet to be bedded down.

This will be a disappointing development for QBE; many had expected the NA assets to be a bright spot for QBE in FY14 as US yield curves sharpened and AUD/USD weakened.

The share price has struggled for months after delivering a fairly lacklustre FY13 report in August, however most had been positioning for a stronger FY14 on a softening of claims and the expected bounce in renewal rates.  Again, this appears not to be the case and the market fears the worst.

The trade

Having seen several surprise downgrades in the past three months, expect a fairly violent drop on the open Tuesday next week. There will be a gap on the open, so be aware it could be filled due to overreactions. I would look for a quick in/out trade in QBE, with a buy in the first half an hour looking to close out on the gap being filled.

Your stop loss should be 5% to 7% under the entry price as the downgrade may be so severe that the market really does cash out and this trade is a risk, but if the gap is fill in the preceding three to four hours the trade a long call should see a nice interim return.

QBE in a trading halt

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.