Market Report: Citi puts Hargreaves at bottom of league


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The Independent Online

Owning football and rugby clubs is an expensive hobby. Stephen Lansdown has a majority shareholding in Bristol City football club and is also the backer of Bristol rugby club. In 2009 he sold some of his shares in the stockbroker he founded with Peter Hargreaves to help fund a new football stadium.

The plans for the stadium at Ashton Vale have had a few hiccups and now so has Hargreaves Lansdown's share price after Citigroup analysts yesterday slapped a sell rating on the financial advisory group and cut its share price target from 630p to 620p.

Citi's scribes think the forthcoming retail distribution review will result in a "significant structural change" in the market. "HL will need to announce and implement a new client-charging structure by end-2013. We see this as potentially disruptive to operations," Citi's experts said.

Hargreaves Lansdown, which listed in 2007, has more than 400,000 "Do-It-Yourself" customers who invest through its platform.

The sell rating – with Citi analysts thinking the shares over overvalued for the "risks it faces" – helped Hargreaves Lansdown get relegated to the bottom of the benchmark index and its shares lost 31.5p to 727.5p. Mr Lansdown is due to step down from the company's board next month and Citi also thinks there is a "potential overhang risk from his 20 per cent stake during 2013".

Hargreaves Lansdown was joined by fallers from the insurance sector, hit by news that Hurricane Sandy will begin its descent on the east coast of the US.

Sandy has forced Wall Street to close, and it will be shut today too. The shutdown due to weather, is the first time since 1985, when Hurricane Gloria was the culprit.

A raft of insurance groups' shares sank as investors speculated how the disaster will affect claims. Losers included mid-cap index general insurers Catlin, down 8.1p to 465p, Hiscox, 7.7p lighter at 476.5p, and Amlin, which lost 5.9p to 368.3p.

The US closure meant a very quiet London; trade is depressed on the back of the shutdown and US earnings results have been pushed back.

But the extremely low volumes and lack of liquidity only sent the FTSE 100 down 11.61 points to 5795.1.

The car insurers also had the brakes slammed on their share prices as part of the wider insurance sector woes.

But the entire car insurance sector could be driving into a period of turmoil; the Competition Commission is crawling over the industry to stamp out any unfair practices in what could be a blow to the largest London listing of 2012, Direct Line last month.

Direct Line's shares, down 2.25p to 190.25p, have soared above their float price of 175p. But it will release its third-quarter update on Friday and yesterday announced job cuts. Admiral steered southward, losing 23p to 1,094p.

On AIM, outsourcing specialist Quindell Portfolio has been very busy trying to gain market share in the £9.4bn sector. It has been making purchases left, right and centre in outsourcing, across software, consultancy and technology, as well as the bumper-to-bumper car insurance sector. Its buying spree has seen it gobble up Pinto Potts Solicitors, software firm Metaskill, Intelligent Claims Management, IT Freedom and Ingenie. According to one motor mouth in the City its motor claims outsourcer, Ai Claims, a firm that Quindell bought during the summer, has had a spot of bad news. Ai Claims' major line of work is with insurer RSA. RSA has just decided to move some of this business to fast-growing US car hire specialist Enterprise.

The gossip thinks this could hit the shares once the market digests the news. But Quindell insists Ai is only a small proportion of the group's profit and that Ai still works with RSA on a number of other accounts. Quindell released a trading update and gained 0.62p to 13.8p.

Software expert Sage Group led the blue-chip risers, up 5.6p to 309.8p. The share price rise was accompanied by an upgrade from analysts at Citigroup, who raised their recommendation to buy.

BAE Systems and Babcock International were boosted by contract wins from the Ministry of Defence for nuclear submarines. BAe, up 0.3p to 311.2p, won a second contract from the Government to design Britain's next generation of nuclear subs while engineer Babcock, rising 2.5p to 955.5p, was awarded a submarine design contract worth £38m.

FTSE 100 Risers

Arm Holdings 665.5p (up 9p, 1.37 per cent) Technology stocks fared better than financial stocks and the insurers who were hit by the fallout from Hurricane Sandy.

Meggitt 386.5p (up 3.5p, 0.91 per cent) The engineer, which provides systems for the aerospace and defence industries, will update the market on Friday. It edged up the leaderboard on chat that its third-quarter update will be good.

FTSE 100 Fallers

Old Mutual 170.5p (down 2.7p, 1.56 per cent) The South African insurer's share price fell and joined the rest of the insurance sector as fears grew over the damage and claims that could follow after Hurricane Sandy hits in the US east coast.

BP 425p (down 6.6p, 1.53 per cent) The oil giant fell on news that refineries in the US have been shut down ahead of the approaching storm.

FTSE 250 Risers

Soco International 338p (up 10.5p, 3.21 per cent) Analysts at RBC Capital Markets upgraded the oil group to outperform and said the company was a good buy "for investors looking for oil price exposure... and a healthy cash flow."

CSR 350.7p (up 12.3p, 3.63 per cent) The microchip maker gained when technology stocks were in favour as investors edged away from stocks affected by the US storms.

FTSE 250 Fallers

African Barrick Gold 442p (down 23p, 4.95 per cent)The miner was again one of the biggest fallers after Friday's statement that is has had to cut its full-year production guidance.

Man Group 78.45p (down 3.4p, 4.15 per cent) Stake-building and speculation of takeover activity continued to surround hedge fund Man Group but some of last week's gains were lost and it ended up one of the biggest fallers on the index.