Nokia nears star status

A globalised Nokia has seen an increase in share price of 60 per cent from 15.83 to 25.53 this past year. Most analysts now give it a price target of the 28 it achieved recently before falling back.

Nokia shares are the ones with the very top approval rating of the Eurostoxx 50. This was so for a considerable time. Then there was a time when Nokia moved out completely from the top 20 of the Eurostoxx 50. It is now back with a vengeance. One reason - perhaps the main reason - for its newly re-discovered popularity, is that the movements in its share price both upward and downward in the last three months have an almost monotonous regularity. This makes it a probable star trading share for the junior stockbroker. Shares must never be traded on impulse, but only after cold, grim reflection, and by keeping a watch on one's health. Ill health can spell disaster.

Not all shares are good trading ground for beginners. A share like that of Northern Rock, the recently nationalised UK bank, is best left to the hedge funds which, by shorting it, registered massive profits. The Nokia share price oscillates not because of any internal difficulties, as it did in the case of Northern Rock, but largely because of the movements of optimism and pessimism in the minds of those who trade it. These movements are necessarily small in the case of a company which is relying on technological and managerial superiority for its success.

Nokia has completely discarded that frame of mind which induced the world's leading bankers to push forward their disastrous sub-prime banking policy. They did this to massively test new psychological and economic banking frontiers. There had been absolutely no precedent in the history of banking as regards last year's subprime finance activity, and certainly not on such a scale. Bankers forked out mortgages to customers despite knowing that there were inadequate repayment possibilities. Silly bank customers are now moving their lenders into a morass of mortgage litigation. The sub-prime nonsense is hardly half-way through. Sound Nokia customers were allowed, on the contrary, to dictate the pace and direction of markets. They did move to pole position, but they were not drug addicts living in campers on a US highway throwing away their sub-prime money on bad habits.

The products Nokia has been selling to sound customers have improved mobility dramatically. They were small devices of unprecedented capability, which have revolutionised the performance of many a money man. Share trades can now be made on the way to one's office, or even as one steps out of a hotel swimming pool.

Nokia and gold now provide the silver living in a black market cloud driven by lightening. The market is now disturbed by the excesses of bankers who thought more about their bonuses than their own reputation and public welfare.

Nokia is definitely propping the morale of the international finance market at the moment. Nokia, which has come to be greater in its capitilisation than the GNP of Finland, is telling western banks to take their own medicine. Do they know that their sub-prime folly is going to give a private equity company like Blackstone its chance to raise debt in the absence of the sufficient bank appetite? If the Blackstone move, prominently reported in the Financial Times and by Bloomberg is a success, what will happen to bank shares in the near future? Will they perform as nicely as Nokia shares?

This article is cultural and not advisory. John Azzopardi Vella, economic consultant with DBR Investments Ltd, has promoted the Malta Development Fund and advised S & P ( johnazzopardivella@hotmail.com )