Forex broker shares caught up in global stock selloff


stock market selloff

Shares of leading publicly traded Retail FX and CFD brokers traded down on Wednesday and early Thursday, in concert with the global stock market selloff taking place over the last 24 hours.

Led by a dive in US shares on Wednesday which saw the Dow Jones and S&P indices off by more than 3%, and the Nasdaq tumble by more than 4%, Far East shares fell by 4-5% overnight and European equity bourses followed suit early Thursday.

The trigger for the selloff seems to be fear that the US Fed will continue its increasing-interest-rates bias, a stance which US President Trump called “loco” in comments made late Wednesday.

Caught up in the selloff were also cryptocurrencies, with Bitcoin down by more than 5% and other less liquid cryptos off in the 10-15% range.

While this type of market volatility usually benefits retail FX and CFD brokers – whose client trading volumes (and revenues) correlate strongly with volatility – a selloff is a selloff and shares of leading brokers have been caught up in the stampede to cash.

As of the first hour of trading in Europe this morning:

  • IG Group shares @ £5.93, down 1%, also hit a 52-week low of £5.83 earlier today.
  • Plus500 shares @ £12.28, down just 0.2%, but are down more than 10% from late last week.
  • CMC Markets shares @ £1.22, down 3% after setting a new 52-week low of £1.196 earlier today.
  • Swissquote shares @ CHF 57.70, down 2%.
  • KVB Kunlun shares @ HKD $0.35 (in Hong Kong trading), down 8%.

Shares of GAIN Capital traded down less than 1% on Wednesday in NYSE trading, buoyed somewhat by the company’s $50 million share buyback announced earlier this week.

Retail FX broker shares are off significantly from recent highs set earlier this year, when a number of brokers reported stellar financial results on the heels of a nice bump in volumes driven (mainly) by crypto trading. However ESMA’s plans to cut leverage which brokers can offer clients in Europe, which was implemented this summer, has already precipitated a major selloff. For example, IG Group shares were above £9 as recently as early August, and (as noted above) are now below £6. Plus500, which has grown to become the #2 UK CFDs provider behind IG, had its shares at an all-time high above £20 in early August, but they are now trading in the low £12’s.

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Forex broker shares caught up in global stock selloff

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