Market Report: SABMiller goes flat over talk of Russian deal

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The Independent Online

As with South America, Russia is a fast-growing market. Beer volumes have grown at an average of 10 per cent over the last five years and international players have flocked to get a piece of the action. Scottish & Newcastle has certainly done very well from its investment in Russia, while just this week the Dutch giant Heineken finalised the latest phase of its expansion in the former Soviet country through the purchase of number seven brewer Ivan Taranov.

SAB is likely to face stiff competition for Krasny Vostok, which could end up being worth up to $1bn. The Turkish brewer Efes is also reported to be eyeing Krasny Vostok. Should SAB swallow the Russian group it will leave more than 90 per cent of the country's beer industry in foreign hands.

Elsewhere, WPP ticked 3.5p higher to 597p as Deutsche Bank moved its clients into the stock ahead of next week's interim figures from the advertising giant. O2, 2.25p better to 149p, was boosted by comments from Dresdner Kleinwort Wasserstein which suggested a takeover of the company by Deutsche Telekom alone is a distinct possibility. It believes that the telecom giant could get around regulatory problems in Germany by keeping O2 as a separate brand there.

GlaxoSmithKline rose 20p to 1,338p as JP Morgan hinted that upcoming results from the drugs giant are very likely to beat expectations. "We believe there is a high probability that near term earnings will surprise on the upside," said the US broker, which also raised its 2005 earnings forecasts for the company by a whopping 10 per cent. Given GSK's undemanding valuation at present, such an event should cause its shares to motor.

Carnival rallied 45p to 2,907p amid relief about the recent retreat in the price of oil, something that will ease the company's fuel bill. Analysts also played down worries that new US passport requirements, which will compel American citizens to carry passports when travelling to the Caribbean, will significantly impact business at the cruise operator. Only one in ten Americans has a passport and to get the document costs around $100. So the new regulation will significantly add to the cost of a Caribbean cruise for many Americans.

However, analysts noted that after taking account of the extra cost to US consumers of getting a passport, cruises remain better value for Americans when compared to alternative types of holiday. Meanwhile, Carnival is less likely to suffer from the new regulations than rival Royal Caribbean because a third of its customers are European and so are unaffected by the rule change.

EMI rose 3.5p to 251.5p thanks to Credit Suisse First Boston's upgrade of the music group to "outperform" from "neutral". The Swiss broker said: "We are becoming more positive on the industry's short-term outlook as piracy is being contained and legitimate downloads are growing explosively." CSFB also expects EMI and its rival Warner Music to enter merger discussions some time in the next 12 months. It estimates that such a tie-up could generate cost savings of up to £75m per year.

HMV gave up 1p to 249.5p as Dresdner Kleinwort Wasserstein pointed out that the music retailer is very exposed to central London, which has undoubtedly suffered a slowdown in trading since the July terrorist attacks. The broker estimates that HMV is one of the most exposed quoted retailers to the capital.

Barratt Development fell 13p to 671.5p as Morgan Stanley placed 3.1 million shares at 675p on behalf of an institutional investor.

Reg Vardy lost 10.5p to 590.5p on the back of a downgrade for the car distributor from UBS. Urging investors to reduce their exposure to Reg Vardy, the Swiss broker suggested trading is far from booming in the sector given that the latest industry data showed a 9.2 per cent year-on-year fall in new car sales to private customers during July. Goldshield added 3.5p to 303.5p as gossips talked of strong trading at the generic medicines producer.

Finally, Corvus Capital ticked 0.62p higher to 14.12p on hopes it will soon unveil a major acquisition. Corvus, which is listed on AIM, is the vehicle of Andrew Regan. The controversial financier has promised to acquire sizeable cash generative companies and is said to have the backing of some major City institutions. Two months ago, Corvus talked of tabling a bid for Royal & SunAlliance.