Fund targets HSBC in flat market

Market Report
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HSBC WAS allegedly a target of hedge-fund buying as other blue chips struggled to remain in positive territory.

A leading but unidentified fund was said to be short of the banking group's shares and, it was suggested, wanted to buy at least part of the stake built by the Hong Kong government as it fought to shore up the former colony's stock market.

The fund, a client of Deutsche Morgan Grenfell, prevailed upon DMG to try to persuade the Hong Kong Monetary Authority to sell. Nobody wanted to talk, but the signs are that DMG was sent away empty handed.

The price DMG offered was said to be around 1,280p a share, rather less than the average paid by the HKMA. The authority has 8.91 per cent of HSBC. It moved into the Hong Kong market in August, buying HSBC and other shares, when the market was crashing. The authority's action appears to have succeeded, with the Hang Seng index holding up relatively well. This week Joseph Yam, HKMA chief executive, said it would hold on to its share stakes for "a long, long time".

Footsie ended17.9 points higher at 5,056.3 ahead of today's futures and options expiry. At one time it sported an 82.7-point advance. Stock market trading was again heavy, with turnover comfortably topping 1 billion shares.

Supporting shares were in form as well, with the mid cap index enjoying a 63.4 gain to 4,469.7 and the small cap rising 18.8 to 1,868.2.

Computers were firm, largely on the back of a BT Alex.Brown investment conference in Baltimore. Misys rose 24p to 362p and CMG 87p to 1,270p. Admiral was 122.5p higher at 865p after a confident trading update and a meeting with analysts.

Telecoms were also strong, with Colt Telecom, up 57p at 587p, topping the Footsie leader board.

As some of the more risky but potentially more rewarding shares were drawn back into the spotlight, the old safe haven stocks found themselves neglected. For example, Thames Water, which has held well during the market slide, fell 48p to 1,004p with Ofwat setting new leakage targets.

EMI, the showbiz group, was at one time down 13p; by the close the loss was cut to 2p at 312p.

Imperial Chemical Industries duly encountered an array of analytical caution as chemical analysts returned after a visit to Spain. On Wednesday the market was dismayed when it was disclosed that ICI's efforts to sell its Crosfield off-shoot in the US had been blocked.

HSBC, Dresdner Kleinwort Benson, ABN Amro, CSFB and Sutherlands were among those making negative noises. DKB even pointed out the unthinkable: that ICI, once the bellwether of Britain's industrial health, could be kicked out of Footsie in the December review. The group is now worth pounds 3.4bn, with the shares up 1p at 475p.

Chemicals group British Vita rose 15p to 227.5p. Many analysts were visiting its Spanish operations when ICI's Crosfield deal breakdown was announced; they returned overnight.

Allied Carpets, the struggling carpet retailer, piled on 6p to 65p in busy trading. Kingfisher, possibly mulling a bid, fell 28p to 530p.

Shell was the heaviest traded share - 39.7 million recorded by Seaq - with, it appeared, ABN suggesting a switch out of Royal Dutch into Shell, down 1p at 354p. Shell added fuel to the market activity by holding a series of investment briefings.

RioTinto, the mining group, was enlivened by the signalled market arrival next year of South African mining giant, Anglo American Corporation, which is taking over its sister company, Minorco, as part of its flotation process.

Reed International softened 23p to 492p on profit warning worries. The group has called an investment meeting for today. Reuters remained weak on a Merrill Lynch downgrade, off 31.5p to 418.5p. The pounds 7m EU fine lowered sugar group Tate & Lyle 13p to 288p.

Ushers of Trowbridge, the brewer, was off 18.5p to 89p as the Alchemy Partners-led management buyout was abandoned. Regal Hotels, another subject of the Alchemy magic, held at 30p.

Arm, the computer chip maker, fell 35p to 810p as shares worth pounds 52m were placed. Apple Computer, the US group, and Acorn were among those selling. The 6.5 million shares, representing 13.3 per cent of the capital, were placed with institutions by Morgan Stanley at 800p. Apple cut its stake from 26 per cent to 20 per cent and Acorn went from 27 per cent to 24.6 per cent. Arm was floated in April.

Deep Sea Leisure, running aquariums, sunk 22.5p to 182.5p. Figures are likely in the next few weeks. The shares touched 390p earlier this year.

Electrical equipment group Filtronic surged 31p to 414p as DKB made positive noises. The investment house is thought to have put a 683p value on the shares.

SEAQ VOLUME: 1.1 billion


GILT INDEX: 110.80 -0.20