Brixton slumped to its lowest level since the early 1980s last night, shedding 19p, or more than 28 per cent of its value, to 48p amid renewed speculation about the need for capital in the commercial property sector.
Hammerson and British Land have already moved to raise funds, while Land Securities confirmed earlier this week that it was considering tapping its shareholders for cash. The fund raisings were widely trailed in the market, with numerous analysts highlighting the need for stronger balance sheets as the property market slowdown gathers pace.
Brixton, whose portfolio is focused on industrial and warehouse space in the south-east of England, is among those which traders expect will be next in line to raise cash, and last night’s weakness was pinned on rumours that an announcement was imminent. Some attributed the extent of the share-price fall to concerns that – owing to the worries about the resilience of its portfolio in the current downturn – the company may not attract as much support as other property groups that have recently gone down the rights-issue route. Brixton declined to comment on the speculation.
In the wider sector, Hammerson was down 9.3 per cent or 36p at 351.25p, British Land lost 3 per cent or 13.5p to 436.75p, and Land Securities was 8.5 per cent or 53p behind at 568.5p.
The blue-chips as a whole recorded their fourth consecutive session in the red, with the FTSE 100 retreating at one point below the 4,000-point mark before recovering to 4,034.13, down 2.43 per cent or 100.62 points, at the close.
Besides sharp falls in banking, mining and commercial property sectors, sentiment was hit by weakness on Wall Street, where investors – just back from a long weekend – digested the grim economic data released |on Monday.
News that the Japanese economy had shrunk by a record 3.3 per cent |in the last quarter attracted particular concern, undermining confidence around Standard Chartered, which retreated by 69.5p or almost |9 per cent to 710p, as investors began to worry about the strength of Asian markets.
HSBC was 6.7 per cent or 36p weaker at 494.5p after analysts at CLSA Asia-Pacific Markets said that, if the banking group goes the way of its peers in Asia, it may end up tapping shareholders for as much as $15bn (£10.5bn) in new funds.
Lloyds Banking Group, which sold some shares in Brixton, also fell, losing 8.69 per cent or 4.9p to 51.5p. Credit Suisse was the latest to weigh in, lowering its target price for the stock to 55p from 90p and saying that, following the recent disclosure that HBOS was on track to report a £10bn loss for last year, it believed that “Lloyds will likely convert its £4bn government preference shares into equity”.
The Swiss broker also issued a circular on Kingfisher, reducing its target price to 125p from 150p for the retailer’s stock, which was down 6.3p at 133.7p.
The analysts at Credit Suisse said: “We believe that it is too early to buy Kingfisher, given the significant and continuing slide in profit expectations and high valuation relative to the peer group and market in general.”
The mining sector tracked metals prices, which weakened owing to the rising economic gloom. Xstrata, down 7 per cent or 54p at 702p, and Kazakhmys, down 6 per cent or 18.2p at 278.5p, were among the weakest.
The gold producer Randgold Resources, 7.53 per cent or 245p ahead at 3,498p, bucked the trend, however, thanks to the price of the precious metal, which firmed as investors sought a safe haven from the economic and financial turmoil.
Elsewhere, the FTSE 250 was down more than 3 per cent or 196.16 points at 6,265.71. Silver prices rose with gold prices, which in turn lifted Fresnillo, the Mexican silver miner, which gained almost 4 per cent or 15.5p to 410p.
On the downside, Yell, the directories group, fell to 38p, down almost |8 per cent or 3.25p, after UBS switched its stance on the stock to “sell” from “neutral”.
“In our view, Yell effectively has up to two years to trade its way out of the current downturn,” the broker said.
“However, revenue declines continue to accelerate, and Moody’s [the credit rating agency] has highlighted the risk of covenant pressures before March 2010 that could result in Yell having to refinance [debt] sooner rather than later.”
UBS was more positive on Wellstream, the oil services group, on which it initiated coverage with a “buy” rating, telling clients that the company was well positioned to benefit from strength in the oil services market. The endorsement was overshadowed by the weakness in commodity-related sectors, however, and the stock closed 4.8 per cent or 24p lower at 476p.
Also on the downside, Domino’s Pizza posted strong results, but the stock eased, losing 3.5 per cent or 8p to 218p, after chief financial officer Lee Ginsberg and Patricia Thomas, a director of the company’s main operating subsidiary, sold some shares in the company.