Market Report: Hopes of a Chinese bid set Marconi buzzing

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The Independent Online

The long march to a takeover deal might be nearly over, if the punters betting on Marconi shares yesterday are right. The telecoms equipment company, whose network products were snubbed by BT in favour of overseas rivals, could be about to agree a bid from the Chinese firm Huawei, it was said.

The pair admitted talks at the start of last month, but said then they were at a very early stage. Marconi says it has enough pre-ordered work from BT and others to justify its independence for another couple of years, but the "for sale" sign has been up for a long time now, and investors think a conclusion is within reach. The keenest speculators thought there might even be news within the next few days.

The company stayed silent yesterday as its shares rose 19p to 299.5p, outpacing a market that bubbled with quiet confidence. The FTSE 100 was up 27.9 points at 5,413.6, despite the heavyweight oil companies shedding value. Oil and gasoline prices fell yesterday as Hurricane Rita weakened and altered course, threatening less damage to the Texas oil industry. Shares in BP, the UK's largest company, were 6p lower at 662p, and Royal Dutch Shell, the second largest, fell 19p to 1,914p.

The index was buoyed, however, by gains for the pharmaceuticals giants, including a big jump that took GlaxoSmithKline to its best level for more than three years. The top-rated team of analysts at Lehman Brothers is highlighting GSK, saying it boasts one of the most valuable pipelines of near-to-launch drugs. The stock was additionally in demand because chartists - investors who seek to divine future movements from the shape of a share price graph - spotted that it had broken through a key "resistance level". Twice before it has stalled at 1,390p per share (in October 2002 and November 2003), but shot through that to close up 38p at 1,417p. Investors are gaining in confidence that years of underperformance by the drug sector might be at an end, as the giant companies' strong cash flows give them scope to make acquisitions and research investments to generate growth - and still have plenty left to hand back to shareholders. AstraZeneca was up 25p to 2,622p, and Shire Pharmaceuticals, which has attracted positive comment on its next generation of hyperactivity drugs, was 14p better at 693p.

Unlucky PartyGaming was the worst performer in the FTSE 100 for the second session in a row. It has lost 13 per cent of its value this week and, down 5.5p to 94.5p yesterday, sits 19 per cent below its June float price. This reflects concern that the growth of internet poker is waning, leaving PartyGaming exposed as the lastminute.com of this year's investment fad. The gloom was reflected in news from the spread betting firm Cantor Index that it has cut its projected issue price for 888.com, a PartyGaming rival due to float next week. Cantor has the price at 164p-170p, near the bottom of the official range of 162p to 212p. Meanwhile, Empire Online, the websites group which ferries customers to online gaming sites, said Noam Lanir, its founder and chief executive, bought 200,000 shares signalling, it said, his belief that the market is underestimating the online poker phenomenon. Empire shares slipped 7p to 186p, and wags pointed out that Mr Lanir had invested barely £400,000, less than the interest he will have earned on the £50m he took out of the business on flotation in June.

GCap Media, owner of Classic FM and Capital FM, was down 9p to 271.75p. The respected media pundit, Raymond Snoddy, highlighted grumbling among the stations' advertisers about the ousting of David Mansfield as chief executive this week. Mr Mansfield, whose expertise is on the commercial and advertising side of the business, lost a power struggle with Ralph Bernard, the executive chairman.

The share-tipping magazine Investors Chronicle recommended a new portfolio of penny stocks, and sent every single one soaring. Arc Risk Management did best, up 0.13p to 1p after the IC said the company's up-to-the-minute security advice service is being more widely distributed. The other AIM-listed shares in the portfolio were: Playgolf, which runs golf courses, up 1.5p to 18p; Alkane Energy, a methane gas specialist, up 2.25p to 38.25p; RC Group, a maker of fingerprint-activated entryphones, up 1.5p to 38p; and Vane Minerals, which is looking for silver in Mexico, up 0.5p to 14.25p.

Five new companies joined AIM, including the delayed arrival of Getech, a company which draws magnetic maps for oil explorers, the latest spin-out from IP2IPO (unchanged at 522.5p). Getech directors agreed to sell fewer shares than planned to help the flotation along, and the stock jumped from its issue price of 39p to 43.5p.

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