Market Report: Laird's rise takes traders and brokers by surprise
Wednesday 24 November 2010
It may have prompted nothing more than a lukewarm reaction from brokers, yet an acquisition deal by Laird resulted in the electronics company touching its highest share price for a year during a session in which major risers were few and far between.
The company finished more than 9 per cent up after announcing it had bought the US-based Cattron Group, which makes industrial remote controls, for $90m (£57m). However, brokers were largely indifferent to the purchase by Laird, which suffered badly last year in the wake of the financial crisis.
Altium Securities was certainly not gushing in its praise, saying that it had expected Laird to wait "until it had clearly demonstrated it was on a recovery path before it entered into acquisitions". Even its admission that "diversification is not necessarily a bad thing and the group has tended to buy well in the past" could hardly be called enthusiastic.
In a similar manner, KBC Peel Hunt kept its "hold" recommendation on the company, yet the market did not listen. Traders expressed their surprise over the gains, with one exclaiming that it seemed "a little bit over the top", and although the price did track back a bit from a high of 160.35p, Laird managed an impressive jump of 12.7p to close at 152p.
Overall, it was a third straight day of falls for the FTSE 100 which dropped 99.55 points to close on 5,581.28, its lowest level for over seven weeks. Worries that other European countries may follow Ireland in asking for a bailout continued to dog the market, while the border clash between North and South Korea also did market sentiment no favours.
"The concern amongst many investors is the timing," said Charles Stanley's Jeremy Batstone-Carr. "As US markets are winding down for Thanksgiving there's likely to be very little volume, and in that context a geopolitical event such as this is likely to have a disproportionately large impact."
Standard Chartered dropped 49p to 1,737p due to its exposure to Asia, but it was by no means alone in the banking sector, despite positive comments from the FSA chairman Adair Turner. Speaking to the Treasury Select Committee, Lord Turner said he did not believe the major banking institutions would need to be broken up to solve "the 'too big to fail' problem".
He also played down fears over British banks' exposure to Irish bonds, yet his comments were not enough to prevent slides from Barclays, down 5.75p to 264.25p, Lloyds Banking Group, down 0.58p to 63.35p, and HSBC, down 9.9p to 643.9p. However, Royal Bank of Scotland did manage to break the trend, edging up 0.21p to 40.05p.
Many of the miners also suffered – especially Vedanta Resources, which slipped 101p to 2,120p – and in the end only six companies on the blue-chip index managed to finish in positive territory, three less than on Monday.
Yet one company did continue to enjoy a successful week, as Tui Travel found itself near the top of the leaderboard again. Traders put the rise down to continued speculation over a potential bid from its German parent, Tui, which already owns a 55 per cent share in Tui Travel, and it put on 1p to 209p.
On the FTSE 250, De La Rue had more than 10 per cent of its share price wiped out after its first-half results showed falls in both pre-tax profits, which were more than halved, and sales, which fell 17 per cent. The banknote printer blamed production problems and it was knocked back 65.5p to 557.5p, with Panmure saying that it believes "the outlook remains negative".
Investors were left disappointed by Mitchells & Butlers' refusal to resume dividend payments before 2011, as the pub group forecast an uncertain future. It lost 9.2p to 344.6p after its full-year results revealed pre-tax profits slightly above expectations.
Nearer the top of the pile was TalkTalk Telecom, which shrugged off Monday's news that Ofcom was launching a new investigation into the company over allegations of mis-selling. It saw a gain of 0.7p to 154.5p, and the broadband company was helped by Credit Suisse upgrading its recommendation to "outperform" from "neutral". The broker cited TalkTalk's cost-saving measures, but did warn that it could struggle to keep its broadband market share.
Positive sentiments from brokers also helped Petropavlovsk as Bank of America Merrill Lynch resumed its coverage on the gold miner in cheerful fashion, giving it a "buy" recommendation. The reason, it said, was that the Russian company's shares have recently underperformed compared to the rest of the sector, and that "the value differential between [Petropavlovsk] and its peers is overdone".
Down amid the stocks on the Alternative Investment Market, Sterling Energy saw its price fall 7.25p to 53.75p after it revealed that an accident at a well in Kurdistan had resulted in a drill pipe breaking. The mishap will cause delays while the pipe is retrieved, the company said, although it was not able to say how long this would take.
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