Yesterday's trading: China fuels BG buying
Beijing buying sparked renewed speculative interest in perennial takeover favourite BG Group. News that the People's Bank of China in recent weeks has bought 15.5m shares, or 0.46%, in the oil and gas producer prompted heavy buying of the stock.
It touched 811½p before closing 32p higher at 808p on a turnover of 34m. Top broker Cazenove called it a 'significant development' and raised its target price to 870p.
China has been looking at ways to invest its growing £600bn stockpile of foreign exchange reserves and its embryonic State Investment Company recently surprised everyone by forking out £1.53bn for a near-10% stake in private equity group Blackstone.
Central Heijin Investments, an arm of the People's Bank of China, which manages £30bn of client funds, is about to be merged with SIC and so the purchase of BG shares has prompted hopes that it could be the prelude to further stakebuilding or corporate activity.
BG recently reported second-quarter 2007 net income of £409m, 6% ahead of consensus forecasts of £386m.
Ever since it split from Centrica in 1997, BG has been tipped as a takeover candidate. Royal Dutch Shell and Exxon Mobil are forever being mentioned as possible bidders, but it could yet become a Chinese takeaway.
From gloom to zoom. Overweight bears were battered into submission as buyers returned to the market with a vengeance. Worries about the deteriorating US subprime mortgage market were brushed under the carpet.
And news that LloydsTSB (23½p up at 558p) is raising its dividend for the first time in five years and drugs giant Glaxo-SmithKline (40p better at 1255p) has been given the green light to keep on selling its
Avandia diabetes drug in the US gave the Footsie a big lift. It closed 154 points to the good at 6,360.1.
Wall Street added its considerable weight to the rally, rising 140 points at the outset following strong earnings reports from General Motors and Sun Microsystems. Core US consumer prices rose a less-than-expected 0.1% in June and that helped support the idea that US interest rates will be left on hold for the foreseeable future.
Reflecting the sudden sea change in sentiment from the depression apparent last week, insurance stocks were in the vanguard of the rally. Buying on hopes that today's interim figures will please, helped Prudential jump 33½p to 683½p. Rumours that a US acquisition will accompany the figures have been doing the rounds for weeks. Panmure Gordon forecasts a 15% rise in pre-tax operation profits to £1.15bn and a 5% dividend increase to 5.7p. Standard Life added 18½p to 308½p and Friends Provident 9¼p to 187p.
Motor insurer Admiral, which took a pasting after pulling the flotation of its online comparison website, confused.com, soared 51p to 820½p. Fund manager Blackrock owns 5.08%.
Housebuilder Persimmon erected a gain of 60p at 1161p, buoyed by impressive results from Taylor Wimpey (30¼p up at 330¼p) and hopes that mortgage rates will be left on hold this week. Director buying buoyed Northern Rock, 35½p higher at 816½p.
Erratic miners sewed a rich seam as commodity prices took a turn for the better. Anglo American jumped 144p to 2904p, Vedanta Resources 88p to 1789p, BHP Billiton 70p to 1473p, Lonmin 160p to 3504p and Rio Tinto 155p to 3606p.
Premier Asset Management, currently in receipt of a bid from Water Hall Group, improved 1½p to 285½p. Dealers heard that the Abdullah Brothers were adding to their near-5% stake.
Persistent talk of a French bid helped water company Pennon trickle 9½p higher to 616½p. Word is the buyer wants to get its hands on Viridor, its waste management services division.
A better-than-expected 19% leap in halfyear pre-tax profits to £26.9m and bullish accompanying statement which spoke of 'very active' oil and gas and power markets, attracted buyers to engineer Rotork, 123p up at 1040p.
Rumours of pending bullish circular left property group Capital & Regional 99p better at 1006p.
Tour operator Thomas Cook gained 21¼p to 309p, reflecting the late rush of holiday bookings by Brits desperate for some sun before the dustbin lids go back to school in early September.
• DEALERS expect Aisi Realty, at 32p, to make a confident debut on the thriving AIM market today. The company invests in property and related assets, principally in and around the major population centres of Ukraine, including the capital city, Kiev. It has raised £55m despite extremely volatile market conditions. Major shareholders include Lansdowne, Macarthur Foundation, Fidelity and Tudor Capital.
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