Cyprus & AIM – another roller coaster spring ahead?

Zak Mir gave Spreadbet Magazine readers some interesting insights into a few AIM stocks this week, in particular Gulf Keystone Petroluem which looks to me as if it might well drop below the key 172p support level rather than start a new breakout – with a court case over the ownership rights to the fields hanging over it then it is not surprising there is nervousness around the stock.

But what of the AIM market as a whole with Chancellor announcing the abolition of stamp duty on trading in AIM shares and so making them even more attractive to retail investors? We would have expected this to give a big boost to the market yet instead we lie the index largely flatlined throughout the week and ended with a dip below the 750 level that it nosed through to the upside during February and March. Indeed, it is heading towards a critical point in the next week – just a couple more percent to the downside and it will have given up the gains for this year in contrast to the FTSE 100 and FTSE 250 which are still ahead materially as shown in the chart below.

The AIM index is of course heavily weighted to the likes of GKP and other oilers, and this sector has continued to underperform for the second year in a row with continued disastrous drill results by many stocks such as Chariot Oil. Even the likes of Rockhopper with proven reserves and a path to market have struggled to show positive returns. AIM looks very likely to be in for yet another rocky ride this year…

Cityunslicker’s own favourite EMED Mining has suffered another delay too in its quest for permitting of the comapny’s copper mine in Spain and has dropped nearly 10% in a week.

So, overall, we are left with another “interesting” week ahead with the desperate situation in Cyprus likely to affect near term directionality.  A fudge and stability looks to be the most likely outcome and if you look back at the history of the Eurozone from 2009 to now, fudge after fudge seems to be the common theme. Mhy guess is that a deal will be done over the weekend to try and calm the markets for a Monday. If Cyprus gets even more messy then we can expect a sharp drop in the index – yet another downhill rollercoaster as happened during the last 2 summers… A  most unwelcome environment for AIM investors given their incremental volatility. Volatility that for a number of years now, investors have not been compensated for relative to their larger cap brethren.

Cityunslicker