Market report: BG hits new peak amid hopes of further cash handouts

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The Independent Online
BG stepped on the gas as stories of further cash handouts and takeover action swirled around the stock market. The shares climbed 13.75p to 305p, a new peak.

Trading was heavy with the order-driven system accounting for around one third of the near 19 million turnover.

The former British Gas astonished many observers when it geared up to return pounds 1.3bn to its investors through the "B" share route last year.

The subsequent disposal programme is running ahead of estimates. It is now expected to realise comfortably more than pounds 1bn, perhaps even pounds 1.5bn, from asset sales by the middle of the year compared with earlier expectations of a few hundred million pounds.

The BG sales bandwagon has alerted the market to the possibly that the group will find itself with so much surplus cash it will feel obliged to return value to shareholders although there is a sneaking feeling it will adopt the share buy-back course.

The group, now largely an oil and gas explorer and producer, saw analysts from Deutsche Morgan Grenfell who reiterated their buy recommendation. Other analysts are keen on the stock.

Last year BG was one of the best performing blue chips. At one time the shares bumped along at around 150p.

There is persistent speculation that its growing oil and gas interests are making it increasingly attractive to the oil goliaths. The current name in the frame is Shell, little changed at 420.5p.

Centrica, the gas operation split from BG in February, was also in form, gaining 2.75p to 93.75p, reflecting the resolution of the last of its North Sea take and pay deals.

For much of the session the market was in ebullient form; trading was busy with turnover easily exceeding 1 billion shares. Worries about the Far East, particularly Indonesia, arose as New York put on a shaky performance during London hours. Besides the tiger economies American investors displayed their usual sensitivity over the highly volatile payroll figures, due today.

Unchanged domestic interest rates came as no surprise. The 72.3 points early Footsie gain was largely in anticipation of a standstill. At the close the index was clinging rather uncertainly to a 13 gain at 5,237.1. Supporting shares were firm.

Retailers were more positive as trading reports suggested the festive shopping spree was rather better than earlier indications. Even so there remains a nagging worry that one or two nasties lurk.

Upbeat comments from jeweller Signet created a 3.5p sparkle to 33.25p; Majestic Wine, with takeover gossip mingling with trading progress, bubbled 20p higher to 421.5p. Two yet to report, Next and Dixons, attracted buyers. Next gained 20p to 725p; Dixons 10p to 587p.

British Aerospace, planning to cut its 21 per cent stake in the Orange mobile telephone group, rose 24p to 1,790p. A BZW warning that profit downgradings could be on the way lowered British Airways 18p to 585p. Nikko, however, remains bullish, suggesting the shares are worth buying.

Securicor collected another buy circular, this time from ABN Amro Hoare Govett. The shares climbed 11.5p to 325p with Hoare suggesting a 400p target. NatWest Securities and SBC Warburg helped BT 11p higher to 500.5p.

British Petroleum's recovery continued with a 12p gain to 790p. Morgan Stanley reckons the shares should go to 875p.

Somerfield had another run. The supermarket chain, which struggled to get its flotation away in 1996, rose 11p to a 230.5p peak. Shortly after its share sale the price fell to 147.5p.

Food retailers have been romping ahead, prompting comments that they are becoming dangerously overvalued. Much of Somerfield's display is due to a simple catching-up process but in the present fevered atmosphere in the industry there is, inevitably, the suggestion that it could be a bid target.

One idea is that Asda could switch its ambitions to Somerfield if it has to abandon its pursuit of Safeway, up 7.5p to 353p. Asda slipped 3.75p to 182p.

Scotia caused a little excitement among the biotechs with the Swedish launch of its weight loss product. The shares hardened 22.5p to 325p. ML Laboratories, in the biotech sickbay, gained 9p to 99p. The shares once touched 468.75p.

Allied Textiles, the latest second-liner to provoke bid action, jumped 41.5p to 165.5p. A management buy-out seems the likely outcome.

Fairway, the printing and stationery group, shaded to 67.5p after the signalled bidder moved in with a pounds 28.2m strike.

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