Market Report: Currency woes leave SABMiller feeling flat

The ongoing weakness of the South African rand took its toll on shares in SABMiller yesterday, leaving them as one of the worst performers in the FTSE 100.

The ongoing weakness of the South African rand took its toll on shares in SABMiller yesterday, leaving them as one of the worst performers in the FTSE 100. The sharp drop in the value of the rand was caused by Thursday's shock interest rate cut by South Africa's central bank and spells bad news for SAB's earnings. Investec Securities estimates that a 3 per cent fall in the currency reduces earnings at the brewer by 1 per cent.

Although the group's stock market rating is by no means demanding when compared with that of its peers, the broker warned that SAB's shares are likely to continue to be negatively affected by the short-term uncertainty surrounding the South African currency. Investec also highlighted the fact that the lock-up governing Philip Morris's 36 per cent stake in SAB is due to expire at the start of next summer and suggested that this too may weigh on the performance of the stock as this date approaches. Philip Morris, now called Altria, received its holding when it sold Miller to SAB in 2002.

Not only is this a massive overhang but the situation is made worse by the fact that South African shareholders are unlikely to be able to participate in any eventual sale of the stake due to the country's exchange control regulations. This can only add further to the pressure on SAB shares ­ which fell 11p to 657p ­ according to Investec. Meanwhile, Old Mutual, another South African company listed in London, fell 2.25p to 98p. The FTSE 100 dropped 26.6 points to 4,301.5.

ITV was the best blue-chip performer, rising 3.25p to 101.75p on hopes that the broadcaster could soon return as much as £1.2bn to shareholders after selling off various non-core assets. Among these assets is a 5 per cent stake in the Premiership champions Arsenal and a 16.8 per cent holding in SMG.

Xstrata, 5p better at 770p, was in demand after Deutsche Bank raised its price target on the mining giant from 800p to 860p. The move follows Thursday's interim results from the group, which came in well ahead Deutsche expectations. Xstrata features on the German broker's "European Focus List", which consists of its 15 favourite stocks in the Continent. Deutsche also pushed Rexam 0.25p better to 414p as it urged investors not to worry too much about the company's exposure to rising steel and aluminium prices. It described their importance to Rexam's cost base as "fairly limited" and told clients to use the stock's recent weakness as a buying opportunity.

Body Shop ticked 1p lower to 151p after Gordon Roddick, the retailer's co-founder, disclosed the sale of 1.25 million shares at 151p. After the disposal he retains a holding of 22 million or 10.5 per cent. Nord Anglia fell 3.5p to 197.5p on talk of poor trading at the group's schools division, while Alexon retreated 7p to 338p on worries that sales at the retailer have been affected by the recent poor summer weather.

The late night bars group Urbium, steady at 532.5p, unveiled the disposal of two loss-making sites in Birmingham. The move is unlikely to change analysts' estimates for Urbium before its upcoming interim results. Centurion Energy, which floated just over a year ago, ticked 2p higher to 144.5p on whispers that its El Wastani field may prove to be bigger than expected.

Regal Petroleum added 9.5p to 406p as the explorer

upped its stake in Kavala Oil, via which it controls the Prinos, Epsilon and Kallirachi oil fields in Greece, to 81 per cent from 57 per cent. Evolution Beeson Gregory applauded the deal, which cost Regal just $12m, and said that it raises the company's net asset value to 613p from 469p. Bulls of Regal predict there will soon be further positive newsflow from the company before the end of the month, possibly from the Kallirachi and Epsilon fields. And they urge investors to keep an eye out for news of a major gas find in Romania later in the year.

The mysterious Formal Property Management Services added to its stake in Homestyle, pushing shares in the soft furnishings retailer 1.5p higher to 105.5p. It bought a further 350,000 shares, which takes its total holding to 4.9 million or 7.3 per cent. All market professionals know about Formal Property is that it is registered in Jersey and that it has a history of taking sizeable holdings in companies before they are taken over.

There was a rush to exit MyTravel, down 0.85p to 5p, amid a growing belief that there is little value left for shareholders in the company given its debt burden. Hedge funds have for a long time been short of the stock, taking the view that the company's planned debt-for-equity swap is unlikely to leave more than 5p a share for the company's current shareholders. MyTravel has debt of about £900m and a stock market value of just £31m.

Bright Things added 5.5pto 69.5p as the broker Corporate Synergy cleared a large seller from the market. The company specialises in developing computer games for the under-sevens.