CMC Markets raises forecast as volatility picks up

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Shares in CMC Markets rose by as much as 25 per cent on Monday after the trading group raised its annual profit forecast on the back of a pick-up in volatility.

The spread betting platform founded by top Conservative party donor Peter Cruddas said an “improvement in market conditions” and demand from retail investors and institutions had boosted trading activity.

CMC is now forecasting net operating income of between £290mn and £310mn for its full year, up from a previous range of £250mn to £280mn 

David Fineberg, CMC’s deputy chief executive officer, said retail investor confidence had improved after equity markets around the world surged towards the end of 2023, following strong economic data from the US, raising the possibility of interest rate cuts.

“Clients were going back into equities and indices [and] we’ve also seen movement on precious metals [like gold bullion],” said Fineberg.

Monday’s upgrade comes after CMC reported an interim loss before tax of £2mn in November, down from a £36.6mn profit the previous year, due to a lack of market volatility.

CMC shares were up 24 per cent to 136.45p by mid-morning trading in London. They have risen almost 40 per cent in the past month, although the company’s valuation remains three quarters smaller than at the peak of the retail trading frenzy in April 2021.

“As we entered into the third quarter, our strategic diversification began to shine through along with positive equity markets,” said Albert Soleiman, chief financial officer.

Broker Peel Hunt upgraded CMC Markets to a ‘buy’ rating. “The benefits [are] starting to be realised of the investment made. We upgrade our recommendation . . . given the lowly valuation.”

Rival platform Plus500 also reported full-year revenues of $725mn (£571mn) from trading fees and client interest in a year-end trading update, beating consensus expectations and sending its share price up 5 per cent to 1,736p.

The FTSE-250 listed company said it returned roughly $350mn to shareholders in the form of buybacks and dividends in its 2023 financial year.

“These significant shareholder returns reflect the group’s ongoing financial strength, its operational resilience and the board’s continued confidence in the outlook for the group,” it said.

“Management’s confident outlook appears justified,” wrote analysts at Jefferies, adding that potential higher volatility in 2024 would benefit the company. “2024 has a variety of foreseeable tradeable events, including elections and rate moves, which should present Plus500 with a more favourable operating environment.”