Market Report: Broker sees silver lining in EMI's Brazil fraud

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The Independent Online

News of an accounting fraud at the Brazilian arm of EMI Group, the music publisher, gave the shares a bit of a beating on Wednesday, but if broker Collins Stewart is to be believed it could represent a good buying opportunity for anyone brave enough to take a punt.

Analyst Simon Wallis believes that the company will not be forced to re-state accounts again because the manager responsible only joined the company in 2005, so it is unlikely that investors will have to swallow more bad news just yet. Mr Wallis believes that the impact of the fraud is only the equivalent of about 2.4p per share, well below the 12p fall the shares suffered on Wednesday. And he believes the fraud could open the doors to a bid for EMI by Warner Music Group. Shares in EMI closed another half-penny weaker at 268.25p.

In the large caps, telecommunications stocks were in focus thanks to a strong set of results from France Telecom. BT Group added 3p to 277.75p, a three-and-a-half year high, as broker Seymour Pierce published a bullish note on the sector. Vodafone was also in demand thanks to performance at Orange, France Telecom's UK mobile arm, as the shares closed 1.25p better at 132.75p, levels not seen since Vodafone sold its Japanese arm in March.

Pharmaceutical investors were left nursing some sore wounds as both GlaxoSmithKline and AstraZeneca were hammered after disappointing news on their pipelines and corporate strategy. Astra-Zeneca tanked 287p to 3,262p, with perennial bear Collins Stewart reiterating its "sell" advice and a 2,736p price target. Glaxo did well in comparison, closing 60p worse at 1,451p.

Weakness in pharma-ceuticals took the edge off a bullish run for blue chips, with the FTSE 100 closing 29.8 worse at 6184.8.

PartyGaming firmed 1.5p to 30.5p on a spot of short covering, but some traders are thinking that the swift retreat from the US market might have been a shade too hasty. Wide-spread reports in the US press suggest that the bill will be difficult to enforce, with a lot of criticism coming from usually anti-gaming right-wing sources. PartyGaming is taking a $250m charge to exit the US, but some traders are unhappy that the company did not take longer to make a decision.

Merrill Lynch became the latest broker to back Wolfson Microelectronics following the recent weakness. German microchip giant Infineon, once part of Siemens, is also thought to be sniffing around the sector and despite the poor newsflow some traders believe it might pick up a bargain. Merrill upped its price target for Wolfson to 350p as the shares climbed 22.75p to 310p.

Results from outdoor retailer Blacks Leisure might have been bad, but at least investors were braced for it. The company made a first-half profit of just £100,000, just about in line with forecasts after August's profit warning, as the stock closed a penny worse at 442p. However, the word in the market is that Mike Ashley, whose stake was revealed yesterday at 29.9 per cent of the company, is preparing to go hostile with a 500p per share bid. One trader said: "After yesterday's numbers, he might need to watch out for investors biting his hand off."

Renesola has been on a fantastic run since coming to the market in August. The Chinese solar panel wafer manufacturer listed at 79p in August and hit 217.5p in early trade yesterday, just shy of a new high. However, like so many of these new listings, there isn't much stock about and a handful of sell orders sent the shares 19.5p worse to 197p. Even so, anyone lucky enough to have been involved in the placing is unlikely to be shedding any tears over yesterday's decline, with the shares still at a 145 per cent premium.

David Fife is due to take over at money mover Earthport on 1 November, and investors have high hopes for him. The shares have been languishing at 21p for most of the last couple of months but the word in the market is that the company is in the final stages of a number of new contracts on top of the deal to join SWIFT yesterday. The shares added 5.5p to close at 25p.

Finally, it was a busy day for Andy Stewart's Cenkos Securities as the broker brought two new companies to the market. There was a decent start to trade in Brulines, which supplies pub landlords with technology that manages beer quality and volume; it raised £7m in a placing at 123p, and closed the day at 136.5p, giving investors a healthy 10.6 per cent premium. Meanwhile, Digital Marketing Group raised a similar sum and placed at 57p, closing 7.5p better at 69.5p, an even better 21.9 per cent premium.

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