Market Report: Kazakh miners climb on currency changes

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The Independent Online

Kazakh mining groups led the market upwards yesterday after a sharp devaluation of the local currency raised the prospect of a reduction in costs. The authorities in the central Asian country announced measures that will allow the tenge to depreciate to around 150 against the US dollar, which in turn is set to lift earnings for the London-listed miners Kazakhmysand Eurasian Natural Resources Corporation.

Both companies are expected to see an improved bottom line, as, for both, costs are mostly denominated in the tenge, while their products are sold in US dollars.

The prospects catapulted Kazakhmys to pole position on the FTSE 100, up 14.86 per cent or 36.25p at 280.25p; while ENRC, at third place, gained 14.38 per cent or 47.5p to 377.75p.

Elsewhere in the mining space, the gold producer Randgold Resources gained 1.12 per cent or 34p to 3,070p after analysts at UBS raised their average gold price forecast for the year to $1,000 per ounce from $700 per ounce, saying that the safe-haven metal had held its ground despite adverse movements in gauges such as the dollar, oil price and inflation.

"Normally, we would have expected this set of circumstances to trigger steep declines in the gold price, but the metal has remained firm in dollar terms and strong in some of the other major currencies," the broker said.

UBS also boosted Lonmin, the Anglo-South African platinum producer, which rose 11.23 per cent or 101p to 1,000p after the broker moved the stock to "neutral" from "sell".

Overall, the miners helped the FTSE 100 gain 64.14 points to 4,228.6, while the mid-cap FTSE 250 index jumped 191.04 to 6,321.81. The market was also aided by better than expected economic data, with the Chartered Institute of Purchasing and Supply (CIPS) saying that service sector activity had improved since December's low point.

The CIPS purchasing managers' index climbed to 42.5 last month, up from the 40.2 that was recorded the month before.

The pharmaceutical group AstraZeneca was the weakest of the blue chips, retreating to 2,622p, down 5.24 per cent or 145p, after results from Roche, the Swiss drug marker, came in below forecasts.

Sector peer GlaxoSmithKline fared better, gaining 1.72 per cent or 21.5p to 1,268p, thanks to the Royal Bank of Scotland, which raised its target price for the stock to 1,350p from 1,190p ahead of the group's fourth-quarter results.

Unilever, which is also due to publish a fourth-quarter report this morning, eased to 1,483p, losing 3.95 per cent or 61p on the day.

Although the update is expected to reveal a solid underlying sales performance, some in the market remain concerned that the strength may fade as the global economic slowdown gathers pace in the months ahead.

In the banking sector, leading stocks advanced after the Chancellor, Alistair Darling, indicated that the Government was open to the creation of a "bad bank", a special-purpose vehicle to purchase toxic assets from the major lenders.

Lloyds Banking Group was amongst the strongest, advancing to 95.2p, up 7.33 per cent or 6.5p, thanks in part to UBS, which reiterated its "buy"recommendation, saying "the risks are containable and the upside is potentially significant".

The broker was less confident about Royal Bank of Scotland, which it said was "still the most challenged by legacy issues", and Barclays, whose business model it said was most at risk from a change in the regulations governing market risk.

Hopes for the "bad bank" plan proved more potent, however, and the two rose despite UBS's worries – RBS was up almost 1 per cent or 0.2p at 20.8p, while Barclays rose 4.98 per cent or 4.6p to 96.9p.

HSBC, meanwhile, was 3.32 per cent or 17.5p ahead at 544.5p amid speculation that it was talking to China's sovereign wealth fund about a possible investment.

On the second tier, Colt Telecom, was 12.54 per cent or 9.5p stronger at 85.25p after Cazenove switched its stance on the stock to "outperform" from "in-line"

Also on the upside, Informa, up almost 6 per cent or 14p at 249p, was boosted by Citigroup, which issued a "buy" note on the stock.

The broker tempered its stance by telling clients that, owing to certain cyclical and capital structure concerns, the publishing group was a "high-risk" investment.

"Simply put, we think Informa has too much debt and, without action, is likely to breach covenants by [the end of this year]," Citi analyst Thomas Singlehurst said.

"The good news is that the group has options. A proactive dividend cut and selective disposals should mitigate the need for an expensive refinancing."

Among smaller companies, AFC Energy surged 28.57 per cent or 0.5p to 2.25p after the alkaline fuel cell market announced the signing of its first licensing deal.

The news cheered investors, who were disappointed when the company missed out on an agreement with Akzo Nobel last year, selling down the shares from 7p to 1.5p.

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