Stock Market Week: Failure of the predicted takeover stampede mystifies experts

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The Independent Online
The failure of the widely predicted takeover stampede to materialise continues to mystify many stock market observers. At the start of the year the world and its dog expected 1995's record-breaking, rip-roaring run to continue and even gather pace.

In the event an unexciting pounds 16bn of bids were completed in the first six months. Granada's pounds 3.9bn strike at the Forte catering and hotel empire was the biggest; otherwise it was left to utilities to keep the big money action flowing. As NatWest Securities say: "Given companies are cash- rich and bids will be harder to push through under Labour, we would have expected more."

It is easy to blame the market's limp performance on the muted bid activity. After hitting peaks early this year shares have tended to drift although interest rates have fallen, company results have been reasonably good and dividend growth robust. Cash calls have not been much of a threat, some pounds 2bn in the first half, and the flow of new issues has not been the drain many feared.

Naturally, there is a feeling a sudden outbreak of corporate hostility would restore the market's confidence, guaranteeing fulfilment of those forecasts that Footsie would end this month at 4,000.

In the unlikely event of a blaze of bids in the lazy, hazy days of summer there is not much to excite shares, despite last week's advance which took Footsie back above 3,800.

Blue chips progressed for seven trading sessions on the trot, a remarkable sequence. There was much talk that 3,900 would be reached but interest petered out as the week drew to a close.

A further interest rate cut could help, depending on the market's mood. New York influences remain important although London underlined again last month its ability to disengage from Wall Street. In part this was due to the low representation that hi-tech shares, which slipped and slithered in the US, have in UK indices compared with their American counterparts.

Still, on most conventional yardsticks Wall Street remains overvalued and London would not be untouched if it suffered another sharp downturn.

Political uncertainties are never far below the surface and there is no unanimity whether or not a Labour election victory has been factored into share prices. NatWest believes Footsie could go to 3,900 points but sticks with its 3,700 year-end forecast.

At stockbroker Beeson Gregory, where smaller companies are the speciality, John Moxon is more optimistic. "UK fundamentals are, if anything, on an improving trend,", he says.

"Not only is growth over the next 18 months likely to be faster than envisaged but corporate earnings should be buoyant without an associated deterioration in the inflationary outlook.

"Largely because of this it is our view that whilst the market continues to be nervous short term it will consolidate at current levels before moving forward again this autumn."

The Alternative Investment Market index, a realistic indicator of small company performance, is nearer its year's high than low. AIM remains free from any absolute disasters although some shares are nursing dispiriting losses.

However, it can point to some outstanding winners. Pan Andean Resources, thought to be on the verge of rich rewards from its Bolivian oil adventure; Financial Publica-tions, which embraces stockbroker Durlacher; Celtic, the football club reporting this week and restaurant group Ask Central are among them.

And the junior market continues to attract recruits.

This week London & Edinburgh Publishing should finally arrive although it has been forced to trim back its expectations.

Against earlier hopes of a pounds 4m capitalisation it has had to settle for just over pounds 3m. The company publishes brochures, programmes and commemorative books. It comes to market via John East & Partners and Fiske & Co.

Dentmaster is also scheduled to arrive this week. It is a rather bizarre new issue. The company's claim to fame is a cheap method of ironing out dents in cars. It is another new issue from AIM specialists Neill Clerk and stockbroker Ellis and Partners.

On the results front it is back to a more traditional lacklustre August display after last week's unseasonable rush of activity.

It is, in effect, the calm before the storm of the September profits season.

Even so, four Footsie constituents parade their wares. Smith & Nephew, the healthcare group, is one of them with interim figures today.

Profits are expected to emerge at around pounds 91m against pounds 85.3m. Slow growth in the US has prompted a number of downgradings. There will not be a contribution from the group's skin tissue replacement involvement which is regarded by many as the outstanding development in its growing but still largely mundane portfolio.

It was only in April that S&N linked with a US group Advanced Tissue Sciences. Its relationship sent its shares sharply higher although much of the enthusiasm has subsequently abated.

Weak bond prices and poor weather are expected to take their toll at the General Accident insurance giant and interim profits will be down, probably by a third to pounds 170m.

BOC, the chemical group, offers third-quarter figures with the market looking for up to pounds 115m against pounds 99.8m, and Hanson, also with quarterly figures, should produce around pounds 280m, down from pounds 321m.

The Hanson statement will be eagerly scanned for further details of the controversial four way demerger.

There are hopes that it will soothe some of the fears which have swept through the market about the nitty-gritty of the break-up.

Others reporting include Sedgwick, the insurance broker with pounds 65m against pounds 63.1m on the cards, and WPP, the advertising group which should manage more than pounds 60m compared with pounds 48m. MAID, the on-line information group, is also listed to appear.

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