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Market Report: Hammerson rises high after new focus on retail

Nikhil Kumar
Thursday 14 October 2010 00:00 BST
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Hammerson was among the gainers as the FTSE 100, swept up by the mining sector, broke through the 5,700 mark last night.

The commercial property group was 8.6p higher at 423.8p after Goldman Sachs issued "buy" advice, citing the promise of Hammerson's new priorities. The broker said that besides cutting back on borrowings, the company seemed to be shifting away from riskier developments and from offices – moves which, when coupled with a growing focus on improving the management of its retail properties, opened the door to more sustainable earnings. That in turn, Goldman explained, promised to underpin growth in net asset values (NAV).

"We believe Hammerson has shifted its focus to deliver better service to retailers that better matches the strong physical qualities of its retail property portfolio. These actions should deliver superior income growth," the broker said, adding that, while the group's limited exposure to the recovering London office market was likely to lead to weaker growth prospects over the next couple of years, its strategy paved the way for "sustainable long-term growth for significantly less risk".

Overall, the markets rallied after hopes of monetary easing in the US triggered weakness in the dollar, sparking gains for the heavily weighted mining sector. As a result, the FTSE 100 moved closer to its April peak of 5,833.73, rising 85.76 points to 5,747, while the FTSE 250 gained 148.44 points to 10,902.

The dollar fell back following the release of the minutes of the last US Federal Reserve interest rates meeting, which supported expectations that policymakers would take further action to increase the money supply in the world's largest economy.

The resultant weakness in the greenback meant that dollar-denominated commodities such as oil and copper were cheaper for holders of currencies. That drove demand on the commodity markets, which swiftly fed through to equities. Vedanta Resources ended as the strongest of the blue chips, rising 131p to 2,347p, while Rio Tinto gained 176p to 4,038p.

Elsewhere, the banking sector was under pressure. Standard Chartered was the weakest, losing 32.5p to 1,876p after unveiling a cash call to bolster its capital buffers in the face of new regulatory requirements. The announcement was well received and the weakness was pinned on technical factors.

In the wider sector, HSBC rose by 7.9p to 671.1p as JP Morgan's earnings report boosted sentiment, but Lloyds and Royal Bank of Scotland were broadly unchanged at 72.6p, down 0.1p, and 47.53p, down 0.1p. Barclays fell by 2.75p to 292p amid talk that, based on Standard Chartered's rights issue, it may need to raise £7bn-8bn to strengthen its capital buffers.

The inter dealer broker Icap rose by 21.3p to 478.9p after Barclays Capital said the company was well placed to benefit from reforms in the market for over-the-counter derivatives. Barclays also played down recent news of broker defections in Singapore, labelling it "immaterial".

"The recent newsflow of 38 voice brokers defecting to rival Tradition in Singapore needs to be seen in context," Barclays said. "Icap employs around 400 in Singapore and 2,284 brokers globally. This loss therefore represents less than 2 per cent of [the] total."

On the second tier, Dunelm, the homewares retailer which rallied after KBC Peel Hunt adopted a "buy" stance earlier this week, rose by 11.2p to 460p after the broker repeated its positive view following a visit to one of the company's newer stores in Milton Keynes. "Retail standards were impossible to fault," KBC said, forecasting compounded annual earnings growth of more than 11 per cent over the next four years.

The gold producer Centamin Egypt sparkled, putting on 11.1p to 182.9p, after Goldman began covering the stock with a "buy" view. The broker was also keen on European Goldfields, which rose by 46p to 792p after Goldman issued "buy" advice. "As the gold price increases, we believe that mid- sized, emerging producers will outperform the major producers," the broker said, arguing that the combination of volume growth and rising prices opened the door to better margins and could potentially make the companies targets for deal activity.

On the latter point, Goldman highlighted Centamin's Sukari gold mine. In the context of the $20bn or so of gold sector deal activity in the last quarter, the broker said Sukari – "as one of only a few world-class assets providing significant near-term production growth not already owned by a gold major" – and hence Centamin – "as a single asset company" – was "strategically attractive".

Instem Life Science Systems, the specialist software group which helps the likes of GlaxoSmithKline and AstraZeneca conduct drug studies, made its debut on the Alternative Investment Market. Aided by support from leading City institutions – the shareholder registers boasts the likes of Aviva and BlackRock – Instem raised £9.15m via placing of shares at 175p apiece. At the close, the stock was 10p higher at 185p.

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