Market Report: Land Securities rises on recovery hopes

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The Independent Online

A number of real estate plays rallied last night, with Land Securities advancing by more than 5 per cent, amid hopes of better times in the depressed commercial property market.

Traders piled in after Andrew Moss, the chief executive of Aviva, a major real estate investor, signalled that a recovery could be on the cards, indicating that it may be time to "get ready to invest". "We do think that as we go through the second half of this year, commercial property in the UK is going to start moving upwards," he said on a conference call with reporters.

The comments follow an update from Lloyds, which suggested on Wednesday that its impairments – which would include those connected to property – may have peaked in the first half of the year, fanning hopes of a turnaround. Besides Land Securities, which closed at 610.5p, up 31.5p, Liberty International gained 2.6 per cent or 12p to 480p, shrugging off a Goldman Sachs "sell" note, and Hammerson, which is rated "neutral" by Goldman, climbed to 384.4p, up 2.1 per cent or 7.9p. FTSE 250-listed Great Portland Estates rose to 259.1p, up 4.1 per cent or 10.3p.

The optimism overshadowed a new Nomura circular, in which the broker switched its stance on the sector to "neutral" from "bullish". Nomura also made stock specific changes, moving Liberty to "reduce" with a revised 382p target price, compared to 388p previously, and Hammerson to "neutral" with a revised 350p target, compared to 362p previously. The broker maintains a "buy" stance on both Land Securities and Great Portland, but upped its target for the latter to 270p from 255p.

Overall, there was no stopping the FTSE 100, which, while off the day's highs, registered another session of gains, advancing by 43.4 points to 4690.53. The mid-cap FTSE 250 index was also strong, rising by 111.47 points to 8377.55

The move up came despite news that the Bank of England had decided to boost its quantitative easing programme aimed at increasing the money supply in the economy, indicating a more cautious take on the prospect of recovery than that implied by the recent stock market rally.

"The Bank is clearly unwilling to take any chances with the fragile recovery that we are currently seeing in financial markets and the economy as a whole," George Buckley, chief UK economist at Deutsche Bank, said, "[It] will continue to monitor the money supply and lending figures closely to determine the effectiveness of the QE programme."

On the FTSE 100, parts of the mining sector fell back, with investors banking profits in Antofagasta, down 3.8 per cent or 28.5p at 726p, and Kazakhmys, down 3.5 per cent or 33p at 921p. The Eurasian Natural Resources Corporation was also left behind, retreating to 879.5p, down just over 2 per cent or 18p, after Credit Suisse moved the stock to "neutral" from "outperform" on grounds of valuation.

Over in the banking sector, the Lloyds rally persisted, with the banking group again claiming pole position on the Footsie, rising by more than 12 per cent or 11.5p to 104.7p as analysts weighed in on its recent results release.

Deutsche Bank moved the stock to "hold" from "buy" in a morning note, citing recent strength and the proximity of the share price to its 100p target. But UBS and Goldman were more bullish, with the former moving its target for the stock to 107p from 120p, and the latter raising it to 131p from 107p.

In the wider sector, the Royal Bank of Scotland, which is due to round off the banking reporting season with its results this morning, was nearly 10 per cent or 4.75p heavier at 53.45p, while Barclays advanced to 354p, up 5.2 per cent or 17.5p.

Further afield, on the FTSE 250, Carpetright mimicked Lloyds, supplementing earlier gains with a 9.8 per cent or 75.5p rise to 844p after Deutsche Bank upgraded the stock to "buy" from "hold" on the back of recent results from the group.

Housing market hopes powered the likes of Persimmon, up more than 5 per cent or 24.1p at 489p, and Barratt Developments, up 5.1 per cent or 11p at 225p. Fellow housebuilder Redrow was 1.4 per cent or 2.8p ahead at 198.3p after Goldman removed the stock from its "conviction sell" list, citing its recent underperformance relative to the wider housing sector.

The broker kept the shares at "sell", however, saying: "Over the next 12 to 24 months, we believe the risk to net asset value remains high, as the company runs down unwanted inventories and adjusts its land valuation for current conditions." Bellway, which unveiled a fundraising alongside its trading statement, was also firm, closing at 785p, up 6p.

Burberry was 2.3 per cent or 10.4p higher at 464.5p, following some words of support from Credit Suisse, which upped its target price for the high-end retailer's stock to 450p from 400p in a European luxury goods review.

The broker struck a cautious tone on the sector, saying that, notwithstanding the recent run, "signs that 'the worst is over' may be increasingly insufficient for this significant rally to continue, ie, we will probably need to see evidence of real demand recovery in coming months."