Market tiddlers join the bull run in dramatic style

Week ahead

A significant, yet little noticed, event occurred last week. The FTSE index recording the behaviour of the stock market's third and fourth-liners, the so-called SmallCaps, reached a record high.

One of the mysteries of the long bull run has been the woeful display turned in by the tiddlers. For a long while the share charge was confined to blue chips, largely financials, drugs, oils and utilities. The MidCaps, the 250 shares making up the FTSE 250 index, were conspicuously absent from the party until they started to buck up in July, sweeping to a peak in August. They have continued to move ahead, reaching another high this month.

The FTSE SmallCap index followed tradition with a firm display in the opening months of the year; then it slipped away. But it joined its peers on Thursday, fittingly the day of John Breckon's small companies exhibition, sponsored by Singer & Friedlander, at London's Barbican.

In the past few weeks the tiddlers have been on a roll, making quite dramatic headway. At the start of the month the index was 2,324.7 points; it finished last week at 2,378.7. NatWest Securities is one investment house which thinks there is scope for more.

It is not, however, universal joy in the lower stretches of the market. AIM shares remain well below their peak.

Still, the small fry have joined the market run at an interesting time. US banking chief Alan Greenspan has indulged in another attempt to talk down equities and the more superstitious souls are getting jumpy as the tenth anniversary of the great crash looms.

The Stock Exchange has ignored the tantalising power of association by bravely deciding to launch its controversial and still seemingly accident- prone order-driven trading system next Monday - a day 10 years ago when Footsie was at one time down a massive 301.7 points.

There is a good chance that, even if shares behave themselves, Monday will be another unhappy milestone in the market's long history.

The advent of order-driven trading, initially embracing the 100 Footsie stocks and dragging in as soon as possible the next 250, is seen in some quarters as signalling the end of the market as shaped by Big Bang 11 years ago.

Order-driven trading, as opposed to the traditional quote-driven, could have extensive repercussions; it may have an even greater revolutionary impact than Big Bang, number one. It will certainly underline the Americanisation of the market and is likely to hasten the creation of a multi-tiered operation with institutions enjoying the privilege of a different market to the one inhabited by private investors.

One suggestion is the market should also be split into three - the top 350 shares, the next 1,750 fully listed shares and AIM. After all, the requirements of Glaxo Wellcome (capitalisation pounds 48.9bn) are far removed from, say, Proteus International (pounds 20m).

Crest, the computerised share settlement system, has already made life more difficult, and expensive, for small shareholders. Order-driven trading will merely tilt the playing field even further against them.

The Stock Exchange, of course, is anxious to keep London at the forefront of the international action.

After all, competition is getting more intense. Frankfurt and even Paris nurse ambitions to topple London from its pedestal as the leading European market. And the activities of Nasdaq, the US market heavily promoting itself here and planning a continental assault, may, in coming years, represent a threat to the well-being of London.

It is to be hoped order-driven trading does not, in the long run, weaken London, leaving it vulnerable to the overseas threat. After all, it is being introduced largely to appease the US-owned investment banks. There is no reason why they should experience any particular loyalty to London - they would be equally at home in, say, Frankfurt.

Premier Farnell, the electrical components distributor, and Smiths Industries, the aerospace to medical group, head this week's modest list of company results.

Today Premier, remembered for a botched profit warning in February which hit its shares, should produce interim profits of pounds 74m, up from pounds 63.8m. NatWest has lowered its year's profits forecast from pounds 167m to pounds 160m to reflect sterling's impact. Last year the group made pounds 173m.

Smiths, fresh from taking over the Graseby electrical group for pounds 136m, should on Wednesday produce year's figures comfortably higher, say pounds 190m against pounds 170.4m.

DFS Furniture, the chain which seemed to come from nowhere, reports final figures on Thursday. A 22 per cent increase to pounds 38m is on the cards. The company, which should have scored from the demutualisation windfalls, has been developed in spectacular style by Tory party benefactor Sir Graham Kirkham.

Highland Distilleries, the Famous Grouse group, is thought to have had a rather subdued time with year's profits, due tomorrow, only some 4 per cent higher at pounds 44.5m.