Market Report: Second-liners race ahead as blue chips struggle

ALTHOUGH blue chips are showing all the signs of suffering a summer of drift and uncertainty, the stock market's second-liners and fringe shares remain in fine fettle.

Yesterday the FT-SE index covering the top 100 shares managed a rise of 13.4 points to 2,825.6, ending a depressing four-day run of retreats. It is more than 130 points from its peak, hit in March.

But the next 250 shares, which have had their own index since October, continued to make progress, stretching to a record 3,168.4, up another 3.3.

And the peripheral shares still attract attention with new highs being hit, although the chase by small investors is much more leisurely than it was earlier this year.

The FT-SE 250 constituents have forged ahead of the more illustrious blue chips in remarkable style. Both indices reached record levels in March but since then, as Footsie has fallen, the 250 index has moved ahead nearly 60 points.

Since its introduction the 250 has climbed 765 points as the more widely followed blue chip index has risen 268.

The drag on the leading drug shares has retarded Footsie. In the past few weeks poor performances by drink and food shares have contributed to the overall weakness.

Although the 250 index has the advantage of embracing many of the alleged recovery shares, such as builders and related operations, it is clear that rank and file shares are proving more resilient to the sell-in- May-and-go-away strategy.

Blue chips' modest progress yesterday was helped by the market's refusal to accept the Whitehall view that further interest rate cuts should be ruled out. As French interest charges again edged lower the suspicion remains that the Government will find it necessary to make another UK reduction in the near future.

British Steel was the star turn, climbing above 100p for the first time since November 1991. The shares, in occasionally brisk trading, reached 102.75p, up 3.25p. A sudden flurry of option activity prompted the excitement.

Many see BS as being in a stronger position than most to survive the restructuring of the European steel industry.

BT improved 6p to 413p as the sale of the Government's remaining shares got under way.

The Zeneca performance continues to mystify with the shares again encountering selling. In unofficial dealings they slipped another 3p to 622p with the nil paid off 5p at 30p.

Many normally shrewd observers believe that soon after Zeneca achieves full stock market status next week it will descend on struggling Fisons. Zeneca, runs the story, will retain Fisons' drug portfolio but sell on the successful scientific instruments side.

Fisons shares encountered late interest, gaining 3p to 164p.

Argyll Group, the Safeway chain, jumped 15.5p to 317p ahead of figures due today. Some believe the results will show the shares have been heavily oversold since hitting a peak late last year. Analysts look for around pounds 420m against pounds 360.5m.

Hepworth, the building materials group, edged ahead 2p to 382p as Credit Lyonnais Laing said buy. It has lifted this year's profit forecast by pounds 7m to pounds 56m. Once Hepworth's shares stay above 401p for 30 consecutive days it can trigger conversion of a pounds 99.9m capital bond into equity, reducing gearing from 127 per cent to 16 per cent.

Harrison Industries fell 1.5p to 6p as it disclosed an approach that could lead to an offer at 'a substantial discount' to the market price. The bidder is thought to be its 25 per cent shareholder, Stratagem.

The newcomer Drew Scientific made the now-customary strong debut for a hi-tech stock. Placed at 105p the shares closed at 150p.

Securiguard moved ahead 4p to 296p. As expected, it rejected the 270p bid from Rentokil.

Property shares were again wanted despite suggestions that more rights issues will follow the Brixton Estates and Slough Estates calls. Golds, too, had a good day with Cluff Resources up 9p at 43p.

UK Land had a remarkable session. The shares rose 7p to 35p, hesitated when the company said it knew of no reason for the interest, and then moved further ahead to 37p. The price was 20p on Thursday.

Ratners, the jeweller, attracted more speculative interest after further suggestions that it was about to sell its US operations. The shares, in often busy trading, advanced 2p to 35.75p.

Specialeyes responded to a return to profits with a 5p jump to 14p; reduced losses lifted National Home Loans 0.75p to 11.5p.

Aminex, the little oil exploration play, continued its remarkable run, reaching 15p, up 2.75p. East West Oil, controlled by Russian interests, has 22.5 per cent and is rumoured to be intent on reaching 29.9 per cent.

Kenmare Resources was firm at 10.75p. It has placed with two UK institutions shares at 11p, raising pounds 450,000. The cash will be used to develop its Mozambique graphic project which should be in production next year. Kenmare recently forged a link with Australia's Broken Hill Proprietary to develop a mineral sands deposit, also in Mozambique.

The FT-SE 100 index rose 13.4 points to 2,825.6 and the FT-SE 250 index improved 3.3 to 3,168.4. Turnover was 510.5 million shares with 28,746 bargains logged. The account ends on 4 June with settlement on 14 June. Government stocks were little changed

Shares of Acorn Computers, the Cambridge group controlled by Olivetti of Italy, jumped 29p to 112p as the microchip its associate company has developed won another convert - the US giant Texas Instruments. The Texas interest could put the chip into cars and telephones. Acorn controls the chip business, Advanced RISC Machines, with Apple, the computer group. Each has 43 per cent.

David Ireland, analyst at Hoare Govett, was in China with BTR, when, through its Australian off- shoot, it fixed up a pounds 100m packaging investment. Yesterday he celebrated by producing a buy recommendation and praised the 'mental agility' of a group supposed to have a 'maturity problem'. He forecast BTR profits of pounds 1,285m this year and pounds 1,465m next. The shares rose 4p to 596p.