Market Report: Metal fatigue sees Russians exit FTSE
Thursday 13 June 2013
The Russian gold miner Polymetal gave one last push to hang on to blue-chip status yesterday, but despite a 1.7 per cent rally, it failed. Polymetal joins a fellow Russian metals group, the steel maker Evraz, who will both shuffle out of the top pack. Last night was the cut-off point for the FTSE Group to declare who is in and who is out of this quarter's reorganisation.
The disappearance of the Russians from the benchmark index after only two years was largely caused by the fall in metal prices. But it also marks a change from what was once a trend for foreign-owned businesses to list on London's benchmark index.
It had previously been thought there would be a rush of companies to London, but this has tailed off, and others have faced corporate governance issues, such as ENRC, which is currently the subject of a move to take it private by the company's majority shareholders – the consortium has until 24 June to make a bid.
Yesterday Polymetal added 11p to 628p and Evraz was 3.6p worse off to 113.75p.
While it was do svidaniya to Polymetal and Evraz, the FTSE Group welcomed the housebuilder Persimmon, 9p worse off at 1,205p, and builders' merchant Travis Perkins, up 12p to 1,538p, to the big league.
The stocks will start trading in their new homes on 24 June.
Across the wider market, concerns on Greece and aborted mergers and acquisitions (M&A) meant the FTSE 100 failed to hang on to early gains and finished the day down 40.63 points on 6,299.45.
The biggest disappointment to traders was Severn Trent after the Longriver consortium, led by Canadian and Kuwaiti investors, abandoned its £5.3bn bid for the utilities group. The consortium, which increased its bid three times during its month-long courtship, complained of a lack of communication between the two parties, and investors punished the board for its perceived lack of engagement – it trickled down 172p to 1,765p.
Some short sellers looked as if they had managed their positions during the flow of news on the bid. David Lewis, EMEA head of SunGard Astec Analytics, said: "As Longriver seems to have dropped their bid for Severn Trent it seems some of the short sellers have managed to recoup some of their losses. Shares on loan dropped to around 1 per cent of their peak balance when the bid was in full flow and the share price soared, but as the market sensed that interest from Longriver was starting to dry up balances on loan went up tenfold on 6 June just ahead of the one-month high of £20.70."
HSBC's analysts then poured cold water on further bid talk in the sector and said "the UK water M&A window appears to have closed".
That didn't stop some traders gossiping that there could still be interest from Abu Dhabi in the mid-cap water group Pennon. But it was 1.5p weaker at 660.5p.
BSkyB got a boost after speculation that Rupert Murdoch may again try to take over the broadcaster. Commentators think Mr Murdoch will be well-placed to gain full control once the split-up of his firm News Corp is complete. BSkyB soared 10.5p to 788.5p.
Vodafone dragged the market down after saying it had approached the German cable operator Kabel Deutschland to discuss a bid. Vodafone, which went ex-dividend yesterday, was cut off by 11p to 181p.
Royal Bank of Scotland edged back 1.9p to 325.6p and after the market closed the chief executive, Stephen Hester, announced his departure by the end of the year.
Last week the comparison site MoneySupermarket said it would pay out £70m in a special dividend. Yesterday the broker Canaccord Genuity issued a buy note with a 213p price target and said: "The impact of the £70m special dividend was somewhat diluted by the news that founder/non-exec deputy chairman Simon Nixon is selling 100m shares," but the brokers still think it looks "attractive for a structural growth story, with a strong brand". But the shares declined 14.7p to 183.8p.
The Aim tiddler Berkeley Minerals said it had bought a copper-processing plant in Zambia, with production expected in the third quarter. It put on 0.02p to 2.4p.
The engineering materials group Versarien joined Aim yesterday, and unveiled the acquisition of Total Carbide. Its shares rose 0.5p to 13.5p.
The communications group Creston produced a solid set of full-year results and Liberum Capital rates it a buy. The group broadcast a 4.5p gain to 97.5p.
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