Market Report: Blue-chip property stocks find firmer ground

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The Independent Online

There has been no place to hide for property stocks since the start of the year – Land Securities and British Land, the bluest of blue chips, have both roughly halved in value as investors have panicked over the state of the UK commercial and retail property market.

But brokers are becoming increasingly bullish, and HSBC became the latest to add its weight to the belief that the worst-case scenario is already priced into the market. It reiterated its "overweight" stance on Land Securities, 100p better at 1,477p, which has just announced plans to split itself into three separate companies. Rivals British Land, also on the receiving end of some bullish broker coverage in the past couple of weeks, were also better, up 61p at 881p.

The interdealer broker ICAP topped the list of blue-chip risers after it posted yet another strong set of numbers, proving once again that its business model prospers when the markets are volatile. Morgan Stanley and Merrill Lynch both reiterated their positive guidance on the stock, which has benefited from particularly strong growth in its electronic broking platform. By the close, the shares were more than 12.8 per cent better, up 73.5p at 645p, a new all-time closing high.

There was bad news in the media sector as ITV shares struggled to make progress after hitting an all-time low of 84.3p on Monday. By the close, the shares had staged a mild rally to close 2.3p firmer at 86.6p, but the poor form of ITV shares has perhaps been felt hardest at rival BSkyB, which owns 18 per cent of ITV, although its shares closed 2.5p better at 626p. Traders believe that competition authorities will force BSkyB to sell most if not all of the stake, resulting in a potential loss of £355m at the current ITV price.

Tullow Oil was heading south after the broker Dresdner Kleinwort cut its rating on the stock to "sell", telling clients that the oil company's assets in Uganda and Ghana are overvalued and that it expects higher operating costs in the UK. The broker cut its price target to 450p, sending the stock 34.5p worse to 597.5p.

With global equity markets staging a decent rally overnight, London shares spent most of the session in the black. The FTSE 100 closed 105.7 better at 6,226.5 as Wall Street also rallied by triple digits in early trade.

Utility stocks were in focus following a review of the sector by the heavyweight broker Goldman Sachs. Kelda, also the subject of some vague bid speculation, was upped to "neutral" from "sell", helping its shares climb 26p to 965p, having been 54.5p better earlier in the session. The US investment bank also gave United Utilities the same upgrade, although its shares fared less well, falling 7.5p to 687p.

In-line results from the oven and refrigerator maker Enodis were not good enough to send the stock any higher, even though it has held its value well against the much weaker market trend. The broker Merrill Lynch reiterated its "buy" stance on the shares with a target price of 235p, but sellers had the upper hand, sending the stock 3.25p lower to 187.5p. The chief executive, Dave McCulloch, backed the stock by buying another 10,000 shares.

Down in the small caps, the beleaguered property services group Erinaceous fell another 0.75p to close at 15.75p, an all-time closing low and a staggering 96.5 per cent below where the shares were trading at in January. The company announced the immediate resignation of founders Neil Bellis and Lucy Cummings, avoiding an extraordinary general meeting called for by Fursa, the company's largest shareholder.

Dog of the day was the online gambling investment group Sportswinbet, which closed over 65 per cent lower after tanking 19.5p to close at 10.5p. The company told investors that will not renew its Alderney gaming licence due to the "competitive global licensing market", and traders headed for the exit.

The residential care provider Care UK was in the black, 30.5p better at 395.5p, as Citigroup upped its stance on the stock to "buy" from "hold" on the back of Monday's results, despite cutting its target price to 460p from 575p. The shares were sharply lower on Friday on the surprise termination of an NHS diagnostics contract, but the broker told clients that even its bear case scenario implies just 11.2 times forecast 2009 earnings, too cheap for a 20 per cent growth rate.

Small-cap mining and natural resource stocks were in demand following a broad sector sell-off on Monday. Uranium Resources posted a 0.5p gain to 4.375p, while Maghreb Mining added 0.5p to close at 5.625p as it published a bullish drilling update. Atlantic Coal, which completed its reverse takeover of Summit Resources on Monday, was also in demand as it rallied 0.1p to close at 1.725p.