Market Report: Orange rings up new high amid rumours of BAe sale

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As most blue chips took a breather after last week's heroics Orange, the loss-making mobile telephone group, continued to dial new highs.

The shares climbed 10p to 320p as the market dwelt upon the story that British Aerospace was near to selling its 21 per cent shareholding.

The sale to a continental group, possibly Veba of Germany or Italy's mobile telephone operation, is the most likely BAe exit route. There has been talk of a placing, even a secondary flotation, but it seems BAe and the other major Orange shareholder, Hutchison Whampoa with 49 per cent, favour a deal with another telecoms group.

It is felt a deal with a European group will improve Orange's chances of developing its operations on the Continent. But if BAe cannot locate a suitable European buyer it is possible Hutchison, the Hong Kong group run by Li Ka-shing, could increase its own holding.

BAe may feel the time is ripe to sell. Telephone shares are riding high on incessant chatter of bids and deals and BAe could pick up approaching pounds 1bn for an interest it stumbled into in the 1980's on a diversification spree.

The group has almost completed selling unwanted bits and pieces, allowing it to concentrate on its core aerospace and defence operations. BAe, still seen as a target for General Electric Co, firmed 8p to 1,734p.

Cable & Wireless provided another indication of the bid fever engulfing telephony shares. The shares jumped 19p to 632p on new suggestions BT was planning to reassemble its earlier aborted merger deal. But the suspicion remains BT, up 2p at 565p, is more interested in a US link with, perhaps, AT&T emerging as its new international partner.

Footsie ended the session down 28.8 points at 5,600.9, a rather ungallant response to a sudden change of heart by City fund managers who, according to the latest Merrill Lynch survey, have at last turned bullish and are dipping into their towering cash piles.

The arrival of so many fund managers on the bull bandwagon will doubtless be seen in some quarters as a worrying indication that shares could run out of steam and the oft forecast bear run is uncomfortably near.

As Footsie faltered, with worries surfacing over the Gulf tension, the supporting midcap and smallcap indices moved to new peaks.

Financials gave ground as their strength this year prompted profit taking. There were distinct signs that small shareholders were tempted to snatch their profits on the former building societies. The selling stampede has prompted Halifax to draft in more staff to deal with the avalanche of telephone inquiries; even so there was an 11 minute wait yesterday. Turnover, put at 6.3 million shares, featured many small deals of around 200 shares. The price fell 25p to 920p.

Panmure Gordon is today expected to publish research suggesting the mortgage banks are overvalued by up 20 per cent and should be sold.

Asda fell 10.25p to 194p with Credit Lyonnais Laing cautious. Henderson Crosthwaite cast doubts on the superstore chains where it said valuations were stretched and opted for convenience stores.

British Energy fell 22p to 438p with Salomon Smith Barney suggesting the shares will underperform and SBC Warburg sell advice on National Grid lowered the price 12p to 322p.

Northern Ireland Electricity, now Viridian, traded 5p lower at 566p following its capital reconstruction which returned pounds 67m to shareholders. Cookson, the industrial materials group, attracted takeover speculation following a 6p gain to 189p.

Warburg helped London International, the condom group, 1.5p higher to 155.5p. With much of its production in Asia, the securities house says the company should be one of the few beneficiaries of the Far Eastern turmoil.

Heal's, the up-market furniture stores, edged forward 4p to 171.5p. An encouraging trading statement is expected at tomorrow's shareholders meeting.

Dalkeith Inns, a cash shell, held at 25.5p as controlling shareholders offered the same price to other shareholders; Zetters, the pools group, put on 6p to 136.5p awaiting bid developments.

Westmount Energy improved 10p to 128.5p. It has a stake in the soon- to-be floated Desire Petroleum which is seeking oil and gas off the Falkland Islands. Greenwich Resources, also with a Desire interest, put on 1.15p to 17p. Eurosov Energy, with interests in Western Siberia, closed at 102p from a 100p placing.

Taking Stock

Planned takeover of Sibir Energy by its largest shareholder, Pentex, has been put back. The delay is due to Sibir's acquisition of a 20 per cent stake in a company developing oil fields in western Siberia. Pentex floated Sibir, unchanged at 35.5p, as a vehicle for its oil interests in the former Soviet Union.

Rebus, the computer services group spun off from insurance broker CE Heath is belatedly catching up with the IT re-rating, firming 4.5p to 108.5p. One investment house has a 150p year-end target, arguing the price would be 250p on US valuations.

Colin Blackbourn, a stockbroker with a knack of picking winners, has taken a 3.1 per cent stake in Tadpole Technology, one of the walking wounded. The shares rose 2.5p to 13p - they were once 408.5p.