Market Report: Miners draw the bargain hunters
Thursday 03 October 2013
Punters on the hunt for a bargain turned to the metal diggers yesterday.
Miners had been the worst-performing sector on Tuesday on news of the US government shutdown as metal prices tumbled. But by yesterday traders said the sector looked "cheap" and bargain hunters pounced.
The price of gold and other metals stabilised following big falls on Tuesday when Investec said: "Gold fell to its lowest level in eight weeks on the US government shutdown, dropping under the psychological US$1,300 an ounce level."
Among the winners was Indian-focused Vedanta Resources which added 15p to 1,090p and gold miner Randgold Resources which was 58p better at 4,396p.
Gold specialists were in focus following a report from the World Gold Council which forecasted that Chinese consumer gold demand may rise by more than 29 per cent this year – to match or beat India. Miner Anglo American was also ahead 18p to 1,502.5p.
Brenda Kelly, senior market strategist at spreadbetter IG, said: "The mining sector recouped some of their losses from yesterday as metal prices recovered and bargain hunters swooped."
The wider market was hit by concerns of political uncertainty in Europe, the continued US shutdown and some big stocks that weighed on the index.
The FTSE 100 index was 22.51 points weaker at 6,437.5. Retailer Tesco was down 1.1p at 358p after posting weak sales growth.
Companies that rely on the US government for parts of their business were feeling the squeeze with publisher Pearson down 25p to 1,225p due to its US education business exposure.
Engineer Smiths Group was 37p worse off at 1,382p. Product-testing specialist Intertek, which tests everything from toys to food and electronics, was 88p worse off at 3,266p.
Of the gainers, Barclays, got on the buy list due to the promise of a bumper dividend payout. Barclays's £5.8bn rights issue – required by regulators for it to build up more capital – could mean investors will get their money back in two years in the shape of jumbo payouts.
Analysts at Espirito Santo said Barclays's intention to increase the dividend payout ratio to 50 per cent next year and the year after will mean dividends of £2.3bn while still keeping a capital excess of £3.1bn above target.
Exane added the bank to its "highest conviction calls" – its Silver Bullet list – for the final quarter of this year, and gave the shares a 356p price target. Société Générale also rated the bank a buy, up from hold. Investors were receptive, and the shares rose 2.75p to 272.55p.
On the mid-tier table, Hochschild Mining said it will raise up to $96m (£59m) to help it buy the remaining 40 per cent in its Peruvian assets – the Pallancata Mine and Immaculada Project – for up to $280m. Analysts at Canaccord Genuity advised the news should be "taken positively" because "the transactions should lower... operating costs" while half of the equity will come from its chairman Eduardo Hochschild – the company's largest shareholder. But the shares fell 19.5p to 155p.
One of oil group Soco International's wells exceeded pre-test expectations and flowed at over 27,600 barrels of oil equivalent a day. It gushed 17.6p to 415.6p.
Entertainment One, which produces Peppa Pig cartoons and distributes the Twilight vampire film series, got a buy rating from Investec because of its "long-term library and annuity sales and profit growth". The shares fell 0.5p to 221.5p.
Aim-listed pawnbroker Albemarle & Bond was hit by ongoing debt problems. The company has a month to save itself from collapse after emergency efforts to raise £35m from investors failed. It tarnished 41p to 28p.
Renewable electricity supplier Good Energy launched its first corporate bond, but slipped 4p to 177.5p.
Mobile content business Mobile Streams posted a 145 per cent sales increase and 200 per cent jump in pre-tax profit, but after rising steadily in prior months, it declined 8.5p to 67.5p.
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