International Finance: Stock Performance Analysis and Exchange Risk for Desklib

This report provides an analysis of the stock performance of Desklib's portfolio comprising of stocks from different industries such as mining, aviation, etc. It also discusses the impact of exchange rates on stock prices and provides insights into the correlation between different stocks and market indices. The report is relevant for the subject of International Finance and includes course code, course name, and university details.

International Finance
1

Requirement-1a
List of Stocks
Australia-based MNC
Name of Company Ticker
symbol
Amount of
Investment
Price per share
at
purchase (17
Nov 2017)
BHP Billiton Limited BHP.AX $10,000.00 27.12
Qantas Airways Limited QAN.AX $10,000.00 5.89
Foreign stocks (ADRs)
Name of Company Country
where
company
is based
Ticker
symbol
Amount of
Investmen
t
Price
per
share at
purchase
(17 Nov
2017)
CYBG PLC UK CYB.AX $10,000.00 5.43
IRON MOUNTAIN
INCORPORATED
USA INM.AX $10,000.00 53.63
2

Week Wise Stock Performance
Week-1: 11/24/2017
Name of company
Stock price
at end
of the week
Percentage
change in
stock price Primary reason
BHP Billiton Limited 27.97 3.13%
BHP Billiton reported positive
financial results for the year 2017,
which caused increase in share price
(Yahoo finance, 2018).
Qantas Airways Limited 5.57 -5.43%
The company reported lower net
income in the year 2017, which
caused the stock to fall down
(Yahoo finance, 2018).
CYBG PLC 5.5 1.29%
The company is incurring losses,
but the stock price has shown a
positive move which appears to be
due to apprehensions of investors
about the good performance in
future (Yahoo finance, 2018).
IRON MOUNTAIN
INCORPORATED 54.43 1.49%
The financial performance of
company has not been good. The
increase in stock’s price seems to be
short term speculation effect.
3

Portfolio (average) 0.12%
Week-2: 12/01/2017
Name of company
Stock price
at end
of the week
Percentag
e change
in
stock price Primary reason
BHP Billiton Limited 27.58 -1.39%
However, the financial performance
is improving, but the mining
industry in Australia is still in slack.
The move in price in this week
seems to be due to change in the
investor’s apprehensions about the
future of company’s performance.
Qantas Airways Limited 5.71 2.51%
Repositioning in the index funds
made stock price of the company to
rise (Financial Review, 2018).
CYBG PLC 5.73 4.18%
The recent reforms in banking and
finance sector in UK are causing
positive impact on the stock.
IRON MOUNTAIN
INCORPORATED 54.12 -0.57%
Weak financial performance has
shown its impact on the stock price
in this week.
4

Portfolio (average) 1.18%
Week-3: 12/08/2017
Name of company
Stock price
at end
of the week
Percentag
e change
in
stock price Primary reason
BHP Billiton Limited 27.17 -1.49%
The fear in investors due to downfall
in mining industry is causing
decrease in stock price.
Qantas Airways Limited 5.34 -6.48%
There was news in the market that
the company may face slow growth.
This bad news caused stock to slope
down (Woodhouse, 2017).
CYBG PLC 5.76 0.52% Short term speculative effect
IRON MOUNTAIN
INCORPORATED 53.14 -1.81%
The company is facing severe cash
shortfall which is the main reason
for decease in volume.
Portfolio (average) -2.31%
Week-4: 12/15/2017
Name of company
Stock price
at end
Percentag
e change
Primary reason
5

of the week
in
stock price
BHP Billiton Limited 27.71 1.99%
Despite mining industry being on
downfall, stock picked up a rise.
This seems to be due to large scale
operations and strong image of
company.
Qantas Airways Limited 5.06 -5.24%
The decreasing trend continued from
the last week.
CYBG PLC 5.66 -1.74%
Volatility in the banking sector in
UK
IRON MOUNTAIN
INCORPORATED 49.74 -6.40%
The company announced buy out of
IO Data for $1.32 billion. The
investors do not expect this buy out
to change the financial performance
of the company (Chang, 2018).
Portfolio (average) -2.85%
Week-5: 12/22/2017
Name of company
Stock price
at end
of the week
Percentag
e change
in
stock price Primary reason
6

BHP Billiton Limited 29.1 5.02%
The company resuming its off sites
which is causing positive impact on
the stock.
Qantas Airways Limited 5.19 2.57% Speculative short terms effect
CYBG PLC 5.8 2.47% Speculative short terms effect
IRON MOUNTAIN
INCORPORATED 48.02 -3.46% Continued from the last week
Portfolio (average) 1.65%
Week-6: 12/29/2017
Name of company
Stock price
at end
of the week
Percentag
e change
in
stock price Primary reason
BHP Billiton Limited 29.57 1.62% Continued from the last week
Qantas Airways Limited 5.04 -2.89% Overall aviation industry downfall
CYBG PLC 5.79 -0.17% Speculative short terms effect
IRON MOUNTAIN
INCORPORATED 48.51 1.02% Speculative short terms effect
Portfolio (average) -0.11%
Week-7: 01/05/2017
Name of company
Stock price Percentag
Primary reason
7

at end
of the week
e change
in
stock price
BHP Billiton Limited 30.58 3.42% Continued from the last week
Qantas Airways Limited 4.89 -2.98% Overall aviation industry downfall
CYBG PLC 5.64 -2.59%
Volatile Banking and finance
industry in the UK
IRON MOUNTAIN
INCORPORATED 47.31 -2.47% Speculative short terms effect
Portfolio (average) -1.16%
Week-8: 01/12/2017
Name of company
Stock price
at end
of the week
Percentag
e change
in
stock price Primary reason
BHP Billiton Limited 31.53 3.11%
The mining operations of the
company picking pace now. It seems
that the investors expecting
improvement in the financial
performance (Surran, 2018).
Qantas Airways Limited 5.03 2.86% Speculative short terms effect
CYBG PLC 5.56 -1.42% Volatile Banking and finance
8

industry in the UK
IRON MOUNTAIN
INCORPORATED 46.18 -2.39% Speculative short terms effect
Portfolio (average) 0.54%
Requirement-1b
My portfolio comprises four stocks which have been taken from different industries such
as mining, aviation, etc. In the first week, my portfolio earned 0.12% which is lower than the
return earned by some of the portfolios of other students. However, my portfolio hit back with
the outstanding return of 1.18% in the second week. In this week, my portfolio performed better
than others and the main reason for this outstanding performance was diversification of my
portfolio. In the third and fourth week, my portfolio incurred losses with the negative return of -
2.31% and -2.85% respectively. The other portfolios of the class also incurred losses in these
weeks. In the last week, my portfolio ended up with 0.54% return which was better than most of
the other portfolios in the class.
Requirement-2
BHP Billiton Vs ASX 200
9

Figure 1: BHP Billiton Vs ASX 200
From the chart presented above, it could be observed that there the trend in BHP’s stock
is largely independent of the trend in ASX 200 (market index). This is due to wide spread
business of the company in many countries across the globe. However, the BHP’s stock is still
affected by the moves in the market index (ASX 200) but the stock has capacity to play on its
own that is without waiting from the market to move.
Qantas Airways Limited Vs ASX 200
10

Figure 2: Qantas Airways Limited Vs ASX 200
From the chart presented above, it could be observed that the stock is moving upward and
downward without the market index moving in the same direction. In the month of July, stock
moved upward but the market was stagnant with minor upside movement. Further, in the month
of December, the stock went down, but the market was again stagnant with some minor upside
movement. This shows that the movements in the stock’s price are not purely driven by the
Australian stock market.
Requirement-3-a
CYBG PLC Vs FTSE 100
11

Figure 3: CYBG PLC Vs FTSE 100
It could be observed that the stock’s price went down in the month of August with overall
market being down in the UK as shown by the downward trend in FTSE 100. From the month of
October, the market conditions started improving as shown by the upward trend in FTSE 100 and
with the improvement in the overall market, the stock also showed rising trend. The continued
with ups and downs in tandem with FTSE 100 till the month of December. This shows that the
market price of the stock is driven to a large extent by the local market conditions in the UK.
Iron Mountain Incorporated Vs FTSE 100
12

Figure 4: Iron Mountain Incorporated Vs FTSE 100
From the month of July to the end of August, the stock was falling down however FTSE
100 could be seen to be moving slightly upside. In the month of September, the stock showed
rising trend but the FTSE 100 showed declining. However, from October to December, the stock
showed same trend as that shown by FTSE 100. This implies that the price of stock is affected to
some extent by the local market conditions.
Requirement-3b
CYBG Vs IRON MOUNTAIN INCORPORATED
13

Figure 5: CYBG Vs IRON MOUNTAIN INCORPORATED
The chart shows that Iron Mountain was increasing at higher speed compared to CYBG
in the months of August and September. In the month of November, both the stocks increased at
similar pace but from the month of December Iron Mountain started falling down severely.
CYBG also fell down in later part of December but it was not that severe. Therefore, it could be
interpreted that CYBG and Iron Mountain are positively correlated with each other.
Requirement-3c
CYBG Vs ASX 200
14

Figure 6: CYBG Vs ASX 200
It could be observed that CYBG was down from July to September. During this period,
the Australian stock market was also down as depicted from the downward slope of ASX 200.
From the month of October, the ASX 200 started rising and it continued till the end of December
with minor downfalls. Somewhat similar trend could be observed that the stock of CYBG. This
implies that the stock price of CYBG (foreign stock-UK) is affected to a great extent by the
Australian Stock Market.
Iron Mountain Incorporated Vs ASX 200
15

Figure 7: Iron Mountain Incorporated Vs ASX 200
The stock is showing volatility in the months of July and August making several ups and
downs. However, the ASX 200 started rising after mid July and it continued till mid August. The
ASX 200 went down from mid August and it continued till the start of October. Iron Mountain
was severely down at the end of August but it recovered awesomely and rose sharply in the first
week of August. It could be observed the market (ASX 200) was down but the stock kept rising.
In the month of November, market also got on the rising trend and then after that market
continued with the same trend but the stock fell down severely in the month of December. Thus,
it reflects that the stock’s price is largely independent of the movements in ASX 200.
Requirement-4
BHP Billiton operates its business in many counties across the globe thus it is exposed to
foreign currency risk against many currencies. However, the most of sales of the company is
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realized in US dollar so it can be interpreted to it is most exposed to US dollar (BHP Billiton,
2017).
Figure 8: BHP Stock and Exchange Risk
From the chart presented above, it could be observed that the USD appreciated against
AUD in the first and second week of December. The appreciation in USD against AUD affects
receivables of the company positively (Prochazka, 2017). The impact of appreciation in
exchange rates could be seen on the stock price in the week-3 and 4 December. It was observed
that on 29th December, the USD depreciated by 1.26% which caused the percentage change in
stock price to go down from 5.02% to 1.62%. From this analysis, it could be articulated that
there exists positively relationship between the exchange risk and the price of stock.
Qantas provides passenger and freight transport services in many countries
internationally apart from Australia so naturally the company is exposed to the risk of foreign
current. The most of the sales of the company is realized in US dollar so it could be interpreted
that the company is most exposed to US dollar.
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Figure 9: Qantas Stock and Exchange Risk
The impact of change in the currency exchange rates on Qantas could be observed to be
more severe than BHP Billiton. The stock’s price has been highly volatile with decreasing trend
over the period. The depreciation of USD against the AUD in the later part of December has
affected the price of stock more badly.
Requirement-5
CYBG Vs Exchange Rate GBP to AUD
18

Figure 10: CYBG Stock and Exchange Rate GBP to AUD
CYBG is basically a UK based company; therefore the exchange rate between GBP and
AUD has been taken for analysis. On 01 December 2017, the exchange between GBP and AUD
showed positive movement. On this date, the stock of CYBG could also be observed to be
showing movement in the same direction. After that, the exchange rate showed downward
moves, the stock price also fell down. Further, same trend between the stock price and exchange
rate was observed towards the end of the portfolio period. This implies that a positive
relationship exists between the stock price of CYBG and exchange rate between GBP and AUD.
IRON MOUNTAIN Vs Exchange Rate USD to AUD
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Figure 11: IRON MOUNTAIN and Exchange Rate USD to AUD
Iron Mountain was established in the United States, therefore, the exchange rate between
the USD and AUD has been considered for analysis. From the chart, it could be observed that
Iron Mountain does not bear any specific relationship with the exchange rate of USD and AUD.
At the start of the period, the stock could be observed to be falling down but the exchange rate is
showing positive movement. Further, the same trend could be observed at the end of the period.
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References
BHP Billiton. 2017. BHP Billiton annual report 2017. [Online]. Available at:
https://www.bhp.com/-/media/documents/investors/annual-reports/2017/
bhpannualreport2017.pdf [Accessed on: 15 January 2018].
Chang, S. 2018. Iron Mountain to buy IO Data Centers for $1.32 billion. [Online]. Available at:
https://www.marketwatch.com/story/iron-mountain-to-buy-io-data-centers-for-132-billion-2017-
12-11-1791044 [Accessed on: 15 January 2018].
Financial Review. 2018. Qantas Airways stock flies as index funds make a move. [Online].
Available at: http://www.afr.com/street-talk/qantas-airways-stock-flies-as-index-funds-make-a-
move-20171129-gzvolg [Accessed on: 15 January 2018].
Procházka, D. 2017. The Impact of Globalization on International Finance and Accounting: 18th
Annual Conference on Finance and Accounting (ACFA). Springer.
Surran, C. 2018. BHP Billiton nixes further exploration of two deepwater Trinidad blocks.
[Online]. Available at: https://seekingalpha.com/news/3322656-bhp-billiton-nixes-exploration-
two-deepwater-trinidad-blocks [Accessed on: 15 January 2018].
Woodhouse, A. 2017. Australia’s Qantas Airways warns of slower growth. [Online]. Available
at: https://www.ft.com/content/e2868510-b9ea-11e7-8c12-5661783e5589 [Accessed on: 15
January 2018].
Yahoo finance. 2018. CYBG PLC: Income Statement. [Online]. Available at:
https://au.finance.yahoo.com/quote/CYB.AX?p=CYB.AX [Accessed on: 15 January 2018].
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Yahoo finance. 2018. Qantas Airways Limited: Income Statement. [Online]. Available at:
https://au.finance.yahoo.com/quote/QAN.AX/financials?p=QAN.AX [Accessed on: 15 January
2018].
Yahoo finance. 2018. Qantas Airways Limited: Income Statement. [Online]. Available at:
https://au.finance.yahoo.com/quote/BHP.AX/financials?p=BHP.AX [Accessed on: 15 January
2018].
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