Market Report: Asda demand leads way to another peak

SHARES of the Asda supermarket group, more deeply discounted than a tin of baked beans in the summer, led the stock market to yet another peak yesterday.

As the FT-SE 100 share index climbed 18.7 points to 2,778.8, Asda, in heavy trading, reached 58p, a 2.5p gain.

It was easily the market's most actively traded share, with Seaq putting volume at a remarkable 73 million. In the last account Seaq suggested volume was more than 140 million. Allowing for double - even treble - counting, Asda shares have enjoyed astonishing demand.

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There seems to be little doubt that Archie Norman, the former Kingfisher finance director who now runs Asda, has performed a remarkable rescue act, transforming the group from the butt of stand-up comedians into a viable contender for supermarket honours against the three industry giants.

And although there has been much-publicised evidence of institutional investors banking on the Norman retail conquest, the dramatic share performance could indicate that Asda, which once fought off Canadian marauders, is back on the takeover treadmill.

Even Asda's own supporters tried to dampen enthusiasm, indicating unease over the share euphoria. With profits of pounds 110m expected in the year to April the shares are on a heady rating. Interim results are due later this month. Sunday trading is now an ingrained feature of profits, and with competition continuing to intensify some analysts think Asda, despite the difficulties of the rival Gateway chain, will make little, if any, progress in the following year.

Three years ago, as the Canadian Belzburg family acquired more than 5 per cent of the capital and the shares edged towards 200p, there were continuing rumours of US and Continental interest. For any overseas group now seeking to break into UK supermarkets Asda, particularly after the Norman reorganisation, must look the best of the available routes.

The Belzburgs are no longer involved. They eventually sold their shares at a loss.

Since the summer Asda has climbed from 22.5p and is clearly a candidate to emerge as the best-performing share of the year.

The rest of the market was determined to ignore bearish indications, domestic and German, that interest rates will not enjoy the hoped for pre-Christmas cut. Institutional investors seemed keen to start the account on a strong note and could be detected picking up stock. But trading was rather squeezy. The FT-SE 100 index's 18.7 gain was struck after stripping out dividend payments equal to 2.12 points.

The failure of the Rosehaugh property group was one restraining influence. Its City partner, Stanhope, fell 6.5p to 11p and ripples of unease were apparent among other highly-borrowed property shares with, for example, hard-pressed Speyhawk down 2p to 11.5p.

Barclays, where worries over its property exposure have already hit the shares, took the Rosehaugh collapse in its stride, actually edging ahead 1p to 374p.

But the latest debacle merely adds to Barclays' property woes; it is deeply involved in Olympia & York, which has 8 per cent of Rosehaugh; Heron International and Imry.

Savoy Hotel 'A' shares, strong last week on bid hopes, fell 50p to 538p. Resort Hotels fell 3p to a 26p low.

Granada, figures tomorrow, jumped 7p to 303p. The revitalised group is expected to produce pounds 115m against pounds 56.9m.

Tomkins, with its rights issue to pay for Ranks Hovis McDougall judged to be a success, was little changed at 228.5p. It is thought the rump to be placed will be about 15 million shares.

Burmah Castrol advanced 18p to 667p, helped along by the stockbroker Williams de Broe lifting next year's forecast from pounds 93m to pounds 100m. Alexander Holdings, the garage group, recovered 2p (to 14p) of Friday's loss, while T Cowie, with 12 per cent of Alexanders, rose 6p to 137p, reflecting Kleinwort Benson support.

The mini-conglomerate Cannon Street Investments was the day's top performer, gaining 40 per cent to 8.75p. It followed last week's pounds 10m disposals by selling a computer operation for pounds 1.4m and the waiving of claims of up to pounds 5m.

Rhino Group, the fledgling video games retailer, jumped 5.5p to 30p in another bout of brisk trading.

Other third-liners actively traded included Aran Energy, unchanged at 16p; Ferranti International, up 0.5p to 9.5p; and Verson International, an engineer, up 1.5p to 7.75p.

Shares failed to hold their best levels yesterday, but the FT-SE 100 index closed at a peak of 2,778.8 points, up 18.7. At one time the index was 24 points higher. The FT-SE 250 index ended 9.9 up at 2,637.5. Turnover reached 635 million shares with 33,894 bargains. Government stocks gave ground

Neil Rasburn, who bowed out as managing director of Haemocell last year, has sold most of his 12 per cent stake in the maker of blood filtration systems. Some 2 million shares, slightly more than 9 per cent, were placed by Henry Cooke, Lumsden at 170p. That compares with the recent rights at 150p, the rump of which was placed at 180p, and yesterday's closing level of 216p, up 6p.

A contract to supply own-label paint to Wickes, the DIY chain excited Manders shares yesterday. Manders, a Wolverhampton-based paint maker which also owns a shopping centre, fought off the hostile advances of the rival Kalon in the summer. But at yesterday's close of 221p, up 20p, the shares are still a long way below the 294p peak reached during the Kalon bid.