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Question about SMT
Tom Bards
Posted: 30 January 2018 12:22:34(UTC)
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Joined: 28/06/2017(UTC)
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As I'm sure all of you know SMT is listed on the FTSE 100.

My question is, and forgive me if this sound silly, why does SMT act the same as other shares on the FTSE. Given that it is an investment trust, it is confusing to me why SMT's prices move up and down with the direction of the FTSE.

They have virtually no holdings in the UK so theoretically even if the FTSE 100 were to decrease by 2-3% but the stocks it holds in the US and China were to increase then surely whatever if happening on the FTSE is of no consequence?

Basically what I'm asking is that given that most of SMT's holdings are outside the UK and are independent from the FTSE 100 why is SMT usually down when the FTSE is down and up when the FTSE is up? Surely the direction of the FTSE is of little consequence if what generally governs the price of SMT is the movement of the companies it owns outside the UK and therefore completely independent to the FTSE 100.


Thanks.
2 users thanked Tom Bards for this post.
James Wood on 30/01/2018(UTC), SAP on 25/02/2018(UTC)
Tim D
Posted: 30 January 2018 12:34:32(UTC)
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Tom Bards;56145 wrote:
Basically what I'm asking is that given that most of SMT's holdings are outside the UK and are independent from the FTSE 100 why is SMT usually down when the FTSE is down and up when the FTSE is up?


A lot of it is driven by currency movements. If the value of the pound falls vs the dollar the value of SMT's foreign holdings goes up... but the value of all the UK-listed megacap international companies who derive 70% of their revenues from abroad also goes up and the FTSE100 rises too.

In the past I just used to look at the FTSE100 number. These days (post-brexit-referendum) I find you have to look at exchange rates too to make any sense of its movements.
4 users thanked Tim D for this post.
James Wood on 30/01/2018(UTC), Jim S on 30/01/2018(UTC), dlp6666 on 30/01/2018(UTC), SAP on 25/02/2018(UTC)
Captain Slugwash
Posted: 30 January 2018 13:33:39(UTC)
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Tom Bards;56145 wrote:
They have virtually no holdings in the UK so theoretically even if the FTSE 100 were to decrease by 2-3% but the stocks it holds in the US and China were to increase then surely whatever if happening on the FTSE is of no consequence?

Basically what I'm asking is that given that most of SMT's holdings are outside the UK and are independent from the FTSE 100 why is SMT usually down when the FTSE is down and up when the FTSE is up? Surely the direction of the FTSE is of little consequence if what generally governs the price of SMT is the movement of the companies it owns outside the UK and therefore completely independent to the FTSE 100.


SMT is not alone in this. This applies to a lot of large FTSE 100 companies. Most of the big players have little exposure to the UK market, if at all.

You are correct in your assumption that if you buy quality investments, the fluctuations of the FTSE on a daily basis is simply noise to be ignored.

jab1tt
Posted: 30 January 2018 13:40:08(UTC)
#4

Joined: 27/01/2018(UTC)
Posts: 1

All transactions in SMT are I suspect carried out by UK shareholders as the stock is not listed on any other exchanges, but all investors are aware of what is going on at other exchanges.

All major markets are closely interconnected, eg the S&P and the Dow fell last night and this was mirrored in today's UK stockmarket.

The other thing to take account of is the NAV which does not automatically follow the shareprice, albeit closely correlated. For a widely traded stock like SMT the NAV will be calculated daily I would think.
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