Market Report: Help to Buy U-turn hits the builders

 

Fears of a property bubble have finally reached the City. The prospect of less stimulus from the Bank of England and steps by the Government to monitor its Help to Buy scheme hit housebuilders hard yesterday.

Home prices have been rocketing, mortgages have become a bit easier to get and Help to Buy has been getting more people on the ladder. In turn, housebuilding stocks have been flying.

But news yesterday that Chancellor George Osborne has asked the Bank of England to monitor the Help to Buy programme and comments from  Bank Governor Mark Carney on easing bond-buying combined to send the builders south.

Persimmon was the worst faller,  down 48p to 1,061p – bottom of the benchmark index.

On the mid-tier table, estate agencies group Countrywide tumbled 26.5p to 518p. It was hit after two of its investors sold a £94m stake. Private equity group Alchemy Partners offloaded a 5.9 per cent stake and an institutional investor ditched 5m shares. It follows Oaktree Capital and Apollo Global selling a total of £200m last month. Other housebuilders were also suffering yesterday. Taylor Wimpey was 3.9p weaker at 97p, Bellway lost 40p to 1,262p and Bovis Homes decreased 20p to 712p.

The housing stocks joined a wider market that was weaker after Mr Carney’s comments on bond buying gave rise to traders worrying that next would be stimulus reduction.

The FTSE 100 index shrank by 52.93 points to 6,512.66p.

But there was one City analyst still talking up housebuilding-related stocks. Goldman Sachs said investors can buy Travis Perkins to get a piece of the current housing boom. The builders’ merchant, which also owns retailer Wickes, is attractive because “UK housing data and Travis Perkins organic revenue growth” have had a “historically strong correlation”. The analysts think the “high operational gearing” of the company will mean good top-line growth and a “faster pick-up in earnings growth”.

The shares were ahead during the morning session but closed down 2p at 1,648p.

Goldman’s experts declared that investors looking for clever buys should ignore “high structural growth” stocks and look at those that are “cyclically exposed” such as Travis Perkins. Other stocks it was keen on included office space provider Regus, up 1p to 182p, and distributor of electronic components Premier Farnell, which produced a 5.8p rise to 216.7p and was top of the mid-cap index after the tip.

Miners were weak yesterday and Chilean-based copper Antofagasta was the worst hit – down 23.5p to 830p. Analysts at Bank of America Merrill Lynch decided to downgrade their gold price forecast and said the only yellow metal miners still worth investing in are Randgold Resources, down 34p to 4,511p, and African Barrick Gold, up 1.4p to 165.1p.

Russian gold miner Petropav-lovsk has recently edged higher on rumours of bargain-hunting and possible interest from chairman Peter Hambro to take it private. But Bank of America reduced it to neutral because of “significant earnings downgrades” and the risk it could breach covenants next year. Petropavlovsk fell 1.75p to 77p.

Following weak half-year results last week, analysts at Cantor Fitzgerald rated retailer French Connection a hold yesterday, and said that although it has made good progress they don’t expect it to break even until 2015 at the earliest. They added that the share price was underpinned by its £25m cash balance and they gave it a 32p price target for shares that stumbled 1.25p to 31.5p.

AIM-listed Interior Services Group (ISG) announced that it has sealed a £32m deal to fit out the new Oxford Street headquarters of Arcadia, owned by Sir Philip Green. Arcadia is the parent company of retailers such as Topshop, Burton and Bhs. ISG built up a 2.5p rise to 241p.

PT Rajawali Corp, the majority shareholder of Archipelago Resources, has made an offer for the rest of the group and plans to relist it in Indonesia and it advanced 8.75p to 5775p.

Berkeley Minerals Resources jumped 0.1p to 2.37p after news that the Kabwe copper-tailings processing plant will start operating in the fourth quarter of this year. Surveillance technology systems specialist Synectics travelled up 12.5p to 502.5p when it announced a new contract with bus group Go-Ahead.

Buy

Babcock International

Snap up shares in Babcock, Cantor Fitzgerald recommends. The broker bases its enthusiasm on the fact that the engineering group’s “key markets remain resilient” and it is confident that “there are significant growth opportunities from further outsourcing in both the UK and overseas. Shares at present are 1,201p with a 1,300p target.

Sell

Electrocomponents

Dump shares in Electrocomponents, Peel Hunt advises. It says it sees the electronics firm “as primarily an income stock for the time being, albeit with no prospect of a dividend increase in the near future”. It gives a target for shares, presently 276.3p, of 220p.

Hold

Carillion

Hang onto Carillion, Investec urges. Shares in the construction services business have recovered strongly in the past three months and the broker says the valuation looks “about right”. It adds that it is struggling “to see much near-term upside”, and that “there is still much to do”. Shares closed at 314.1p with a 305p price target.

Start your day with The Independent, sign up for daily news emails
Life and Style
A monstrous idea? Body transplants might no longer be science fiction
Science An Italian neurosurgeon believes so - and it's not quite as implausible as it sounds, says Steve Connor
Sport
Demba Ba (right) celebrates after Besiktas win on penalties
footballThere was no happy return to the Ataturk Stadium, where the Reds famously won Champions League
Arts and Entertainment
Natural beauty: Aidan Turner stars in the new series of Poldark
arts + ents
News
Mia Freedman, editorial director of the Mamamia website, reads out a tweet she was sent.
arts + ents
News
people
Arts and Entertainment
The write stuff: masters of story-telling James Joyce, left, and Thomas Hardy
arts + ents...begging to differ, John Walsh can't even begin to number the ways
Sport
Jose Mourinho on Sky Sports
footballEXCLUSIVE COLUMN Paul Scholes: It was not a leg-breaking tackle, as the Chelsea manager had claimed
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Telesales / Marketing Executive - B2B - OTE £25,000

£17000 - £25000 per annum: Recruitment Genius: An opportunity to join this new...

SThree: Trainee Recruitment Consultant

£18000 - £21000 per annum + OTE £45,000: SThree: SThree Group have been well e...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Recruitment Genius: Business Control Manager

£36000 - £44000 per annum: Recruitment Genius: Encouraging more businesses to ...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower