Market Report: 'Defensive' Standard Chartered stands firm

Nikhil Kumar
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Standard Chartered enjoyed steady gains yesterday, comfortably overcoming the nervousness still unsettling the wider market as analysts highlighted its lack of exposure to the troubled European economy. With the sovereign debt storm still at the forefront of investors' concerns, the stock went as high as 1,413p, up from 1,377p at the close on Wednesday, after Collins Stewart backed the lender, saying that, of the banks under its coverage, it was the "most defensive name" in light of the crisis.

The reason was the group's exposure – or lack thereof – to the Continent. In fact, at the start of this month, Standard Chartered, up 13p at 1,390p at the end of the day, clarified that it had no direct sovereign exposure to the PIIGS: the troubled Portuguese, Italian, Irish, Greek and Spanish economies. It also revealed that its direct sovereign exposure to Europe in general was "immaterial", thus putting any misguided speculation to rest.

In the wider sector, Royal Bank of Scotland was the only other bank to close in the black, ending broadly flat at 21.11p, up 0.02p, after Citigroup reiterated its "buy" recommendation. HSBC was the weakest, shedding nearly 2 per cent or 9.35p to 496.95p as analysts responded to its third-quarter results – and third-quarter loss – on Wednesday. "Difficult times hurt even the strong," UBS said in a circular to clients, trimming its target for the lender's shares to 520p from 530p.

Overall, traders remained jittery, despite Italian bond yields easing off recent highs after the country managed to sell €5bn-worth of treasury bills. Later in the day, there was also some positive news from Greece, where the former European Central Bank vice-president Lucas Papademos emerged as the replacement for the outgoing Prime Minister George Papandreou.

Weighing against this was concern at the uphill task faced by both nations and the fear that their large debt piles will become harder to deal with as Europe is hit by another slowdown. As if to underline the issue, the European Commission warned that "growth has stalled in Europe, and there is a risk of a new recession".

The result was that the FTSE 100 lost another 15.56 points to end the session at 5,444,82, while the FTSE 250 fell by a further 81.43 points to 10,187.44. There was no bloodbath, but, as Markit analysts noted in their round-up of the credit markets yesterday, there was plenty of volatility.

Investors looking for a bright spot amid all the gloom turned to Experian, the credit data company, which surpassed expectations with its half-yearly results. Its reward for growing six-month profits by 20 per cent was a 5.4 per cent or 42p rise in its share price to 826p, with the jump earning it the FTSE 100 crown.

On the downside, the car insurer Admiral, which was hit by a double-digit fall after warning on profits on Wednesday, was down another 7.6 per cent or 67.5p at 820p last night. Numerous brokers weighed in, including Deutsche Bank, which lowered the stock to "hold" from "buy", UBS, which lowered it to "neutral", and Credit Suisse, which scaled back its target price to 1,100p from 1,500p. Credit Suisse did, however, upgrade its recommendation to "neutral" from "underperform", citing the improved valuation of 9.6 times forward earnings for next year after Thursday's pullback.

Away from the big boys, Homeserve shot up on the FTSE 250, surging by more than 17 per cent or 37.5p to 256p after reassuring investors with an update on its sales and marketing activities.

At the end of October, the emergency repair and insurance group said it had suspended all its telephone sales and marketing activities. The halt was prompted by a review that showed that there were cases where Homeserve's "sales processes did not meet the company's required standards". But yesterday it said it had recently restarted some inbound telephone sales activity, helping to bring back investors to the stock. Additional support for Homeserve came from Brewin Dolphin, which raised its recommendation to "hold" from "sell".

The bingo operator Rank also enjoyed a strong session yesterday, adding around 9.5 per cent or 13p to 150p after securing a favourable court judgment. The European Court of Justice ruled in favour of its claim that it had paid too much VAT on certain amusement machines and bingo, with investors buying in as news filtered through to the market.

The aircraft parts supplier Meggitt was out of favour, falling by more than 4 per cent or 16.7p to 369.7p after Citigroup analysts switched their view on the stock to "neutral". "Meggitt offers a number of investment attractions, including a significant civil aerospace aftermarket exposure," the broker said. However, when it came to the shares, the strengths of the business were tempered by Citi's belief that "these positives are reflected in the current valuation".