Market Report: Man Group up as bid talk whets investors' appetites

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The Independent Online

Those rumours circling Man Group just refuse to die. Shares in the world's largest listed hedge fund dominated the top tier for the second day in a row, as talk of a takeover was re-animated yet again.

Yesterday's gossips pointed towards a large US financial services group as the potential bidder, with Bank of New York Mellon once again the preferred pick. Rumours of the banking industry tilting at Man have been rumbling since last year year (when Barclays was mentioned) and continues to excite trading floors. Talk of a bid has subsequently moved the shares in July, August and September.

Man, which is digesting a major acquisition of its own after it sealed the $1.6bn takeover of GLG, saw its share price rise by 5 per cent, or 12.1p, to 249.8p – its highest since June. The stock had found buyers during the previous two days following a positive update on the performance of its AHL Diversified fund.

Retailers were also being snapped up yesterday. Marks & Spencer rose by 19.2p to 410p after it said underlying UK sales had come in comfortably ahead of the City's expectations. Despite the cautious outlook, the 6.5 per cent boost in like-for-like sales in the second quarter pushed up the price. Freddie George, an analyst at Seymour Pierce, reiterated his "buy" recommendation on the chain, saying the update "does indeed indicate that general merchandise now has real momentum".

Burberry was close behind as it stormed up the blue-chip index. The luxury clothes and accessories brand benefited from a positive read-across at Mulberry, which issued a trading update. JPMorgan Cazenove also lifted its target price from 830p to 960p, with a "neutral" rating. The broker expects Burberry to post a sales increase of 17 per cent in its first-half update next week. The shares closed up 25p at 1,030p. Mulberry's stock soared by 27.5p to 440.5p in the wider market as it announced that sales had risen by more than half in the past 10 weeks.

Philip Dorgan, of Altium Securities, said such growth was "staggering" and predicted that investors could "expect to see many years of well above average growth". He upgraded the target price from 350p to 550p.

Traders were looking towards the Bank of England's decision on interest rates and any hints of a return to quantitative easing. In the event, the rate was pegged at 0.5 per cent for the 19th month in a row – the longest period with no change since the Second World War. The lack of movement translated on to the FTSE 100, which was slightly ahead before lunch but closed slightly lower at the end of the session, falling by 19.2 points to 5,662.1.

The shine came off the banks as investors decided to pocket profits after a strong recent run. Among the fallers was Lloyds Banking Group, which gave up 1.67p and closed at 47.82p.

Miners also weakened. Kazakhmys, which has been in the news recently after the Kazakh government increased its stake in the company, was the worst in the sector, giving up 83p to close at 1400p. Other top-tier miners followed suit, with Antofagasta closing 64p lower at 1249p after Citigroup reduced its rating on the stock from "hold" to "sell". On the second tier, however, there was a bit more joy for the sector. Hochschild Mining, which has gold and silver operations in Peru, revealed that it had made several high-grade finds in Argentina. The news sent the company's share price up 13.7p to 490.2p.

Earlier this week, Imagination Technologies, which designs graphics chips for smartphones and tablet computers, signed a licensing deal with Netlogic which boosted the share price. It was helped up again yesterday after Morgan Stanley initiated coverage with an "overweight" rating and a target price of 355p. It said there were still good returns to be had from Imagination, and its rivals ARM Holdings and Wolfson, "which benefit from a shift in end demand from PCs to smartphones and tablets". The shares rose 13.4p to 402.6p.

Rank Group investors were banging the gong after a solid update. The shares rose by 3.5p to 125p after the gaming company said its full-year performance would be at the top end of expectations. Analysts duly threw their weight behind the stock. Investec lifted its target price from 137p to 156p; Panmure Gordon upped its target from 145p to 173p.

Worst on the second tier was the bike and car accessories retailer Halfords Group, after sales fell 6.3 per cent because of problems at its new distribution depot in Coventry. Although the group said it was on track to meet full-year expectations, shareholders fled, sending the stock down 3.5p to 125p.

On the Alternative Investment Market, Redhall saw its shares rise 1.5p to 126.5p after it said it had dropped its takeover bid for rival Mount Engineering, paving the way for Cooper Industries to seal a deal. Mount Engineering fell by 1.5p to 82.5p.

Elsewhere, tiddler Clarkson Hill Group's shares doubled to 3p after it announced that it was the subject of a takeover bid itself, although it would not reveal the suitor's identity. The financial adviser is in talks with the Financial Services Authority to solve issues with its regulatory capital.

Meanwhile, the lottery operator Weather Lottery said it had bought Clicknow Holdings, which operates a search engine supporting charities, schools and not-for-profit organisations. Its shares closed up 0.1p at 1.07p.