Market Report: Land Securities hoisted up by Merrill note

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The Independent Online

Land securities gained more than 4 per cent or 46p to 1,161p last night after a fresh round of buying took the London market past the 4,600-point mark.

Supportive words from Merrill Lynch, which added the company to its list of "most preferred" property stocks, provided a boost as investors mounted another hunt for bargains.

"[It] is now trading at a 22 per cent discount to net asset value versus the UK majors [which are at a discount of] 15 per cent," the broker said. It noted that the company's balance sheet "remains in good shape" with little or no refinancing risk in the short term.

Merrill added: "The [proposed] demerger is now on hold, which makes sense in our view, but there is still the scope for a sale of Trillium, which we would see as a positive. As we have highlighted a number of times, the proceeds could be used to pay down debt."

Overall, similar moves to capitalise on depressed values took the FTSE 100 up 196.22 points, or 4.4 per cent, to 4,639.5. The FTSE 250 was also firm, gaining 334.99, or 5.2 per cent, to 6,778.7.

Strategists at Morgan Stanley said that their market-timing indicators were bearing "a full house buy signal".

"Each of the four indicators (valuation, capitulation, risk, fundamentals) tells us to buy. The latest elements that pushed us there have been a capitulation among retail investors, purchasing managers and sell-side analysts ... the idea is that when these three groups know about the bad news, equity prices are probably already reflecting it."

On the FTSE 100, Lonmin rose 14.89 per cent or 165p to 1,273p as investors made the most of recent falls, ignoring some negative commentary from Goldman Sachs. "Ongoing operations problems at Lonmin will likely limit cash inflows, while capex spending on mechanisation programmes and mine development will take debt to elevated levels," the broker said, adding the stock to its "conviction sell" list.

In the banking sector, reports that up to two bidders were preparing to counter Lloyds TSB's merger offer drove HBOS to 116p, up 10.06 per cent or 10.6p. Lloyds was up 6.17 per cent or 12.2p at 210p following reports that it may redeem government preference shares by inviting sovereign wealth and domestic investors to take stakes in the combined HBOS-Lloyds entity.

The transport group Stagecoach was the weakest on the FSTE 100, down 5.64 per cent or 11p at 184.2p, after oil prices rose in late trading as the dollar dropped against the euro.

On the second tier, housebuilders registered fresh gains ahead of the Bank of England's interest rates decision, which is due tomorrow. The prospect of a 1 point cut forced another round of short covering as short sellers scrambled to pull their downside bets. Taylor Wimpey was the strongest, gaining 16.36 per cent or 2.25p to 16p, while Persimmon climbed 9.66 per cent or 31p to 351.75p.

Elsewhere, gambling companies were strong after Merrill Lynch said an Obama victory may lead to more open markets in the US. "We think it could ultimately pave the way for online gaming regulation rather than prohibition," the broker said, highlighting Democratic moves to repeal the Unlawful Internet Gambling Enforcement Act, which was introduced in October 2006 to prohibit the transfer of funds from financial institutions to any internet gambling site.

Merrill added: "There have been separate acts to legalise internet gambling as well as those that particularly target poker and other games of skill. We think that with a Democrat president and Democrat-dominated Congress, such legislation would likely have a greater chance of being passed through."

The prospect of freer markets across the Atlantic boosted Partygaming by 6.15 per cent or 8p to 138p, and 888 Holdings, up 12.46 per cent or 9.5p at 85.75p.

Also on the upside, HMV climbed 9.88 per cent or 10p to 111.25p amid talk that it was mulling a merger with Game, the computer games retailer which gained 15.19 per cent or 19.75p to 149.75p. The speculation was vague, bearing no information about the timing or the details of the supposed merger, and was soon dismissed by traders who said the surge in the share prices was probably caused by a round of short covering.

A downbeat outlook bore on Punch Taverns, the pubs group, which lost 7.36 per cent or 13.5p to 170p. News that trading in September and October had remained "extremely challenging" overshadowed a set of in-line preliminary results. There was also concern about debt, with Cazenove saying that, while the group has managed to redeem £77m of its December 2010 convertible bond, its analysis suggested that Punch's "ability to access sufficient cash to meet the rest of the redemption is finely balanced".

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