Market Report: 'Rush for yield' lifts real-estate sector
Tuesday 20 October 2009
The City was in buoyant mood as the blue chips shrugged off three negative sessions to hit a year high, ensuring that the 22nd anniversary of Black Monday passed without incident.
Real estate gave the market firm foundations after support from Evolution Securities, which said the "rush for yield is driving a bull market" in the sector. The analyst Harry Stokes said that while the market fears the effects of the end of quantitative easing, currently UK real estate yields 7.2 per cent, while cash "yields near zero".
British Land was the top performer, rising 4.04 per cent to 492p as Evos upgraded it from "reduce" to "buy" and raised its target price from 460p to 515p. To mark the fragility of the situation, the analyst titled his note "Bull market in a china shop".
Much of the FTSE 100's advance was copper bottomed, as a rise in the heavyweight miners send the index up 91 points to 5281.5. Anglo American ended the pick of the bunch, benefiting from the expectation of rebounding prices in Asia and the weak dollar's effect on commodity prices. It was also supported by a Deutsche Bank note which recommended investors "buy", sending it up 4.75 per cent to 2304p.
The distribution and outsourcing group Bunzl hauled higher as cost-cutting and positive exchange rates helped to lift revenues in the third quarter. Shares rose 2.52 per cent to 652p.
There were few fallers on the index, but Aviva was the worst, down 1.51 per cent to 443.5p. The insurance group announced the partial float of its Delta Lloyd on Euronext which expects to raise about €1.2bn. The group is to sell about 42 per cent of its Dutch business in what will be the largest initial public offering in Western Europe this year. The move was made to "free up capital for us to use elsewhere and give us the option of exploring further growth opportunities," Aviva's boss Andrew Moss said, yet the shares fell as investors believed that the group should have raised more for the stake. The sale is seen at a discount of about 24 per cent to the company's own estimation of its value.
Cable & Wireless disconnected on a report from Citi, which reduced its rating from "buy" to "hold". The US broker also slashed the target price from 250p to 155p over the uncertainty surrounding its demerger plans. The shares eased 0.22 per cent to 138.8p.
There were two stocks vying for top spot on the second tier throughout the day. Investors were placing their bets on William Hill, sending it 10.24 per cent higher to 178.4p as it revealed it was on track to deliver its full-year numbers. Rival Ladbrokes had spiralled after launching a discounted rights issue, cutting its dividend and complaining that the Premier League season had started badly this month. Nick Bartram, analyst at KBC Peel Hunt, said William Hill was "coping better than Ladbrokes".
Coming up on the inside to steal top spot was National Express, after it received an approach from Stagecoach. The share price had suffered after talks with the CVC-led consortium collapsed, but rebounded yesterday on the news that its UK rival could salvage a deal. The shares closed up 10.5 per cent at 400p.
Wellstream Holdings was feeling poorly as UBS cut the stock's rating to a "sell" from "neutral". The analyst Alex Brooks said the first-half results were "in our view a profit warning", adding that although the shares have fallen, there was "further to go". Investors hoping that the company is taken out will also be disappointed, as UBS said, "we believe none of its direct competitors is a likely buyer". The result? Shares down 2.93 per cent to 563p.
As we head inexorably towards the Christmas season, shareholders in Yule Catto & Co in the wider market were in a mood to celebrate. The chemicals group was up 19.7 per cent to 176p after third-quarter profits beat management expectations after a solid cost-cutting programme. There was cheer as the group also repaid the £33m instalment from its loan without dipping into its bank facility.
St Ives fell to its first reported loss in 24 years on the London Stock Exchange. The printing group has clients including Penguin and Bloomsbury, but business has been smashed by the economic climate, according to chief executive Patrick Martell, and he doesn't see any improvement in the near term. Last year's £30.6m profit crumbled into a £7.2m loss. The shares dipped before rallying in the afternoon to close up 3.86 per cent at 74p.
Storming up London's Alternative Investment Market was Chariot Oil & Gas after it secured a deal with the oil giant Petrobras. Chariot was on fire after it agreed to farm out a 50 per cent interest in an exploration block off Namibia in a deal worth $16m. If there is a commercial discovery, it will be handed a production bonus worth about $118m. Shares rose 18.37 per cent to close at 28.75p.
Yet, stronger still on the growth market was Media Corporation, which rose 29 per cent to 2.9p as Google let it off the leash. The advertising network and internet publishing group announced that the search giant had lifted its penalty on two of its major websites. The penalties on a gambling site and a credit card comparison site had caused a "significant reduction" in traffic and consequently revenues.
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