Market Report: BSkyB Tumbles as Index Reweighting Pressures Mount

By Jivkov, Michael | The Independent (London, England), November 2, 2001 | Go to article overview
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Market Report: BSkyB Tumbles as Index Reweighting Pressures Mount

Jivkov, Michael, The Independent (London, England)

ON A day of impressive gains for shares on both sides of the Atlantic satellite broadcaster BSkyB fell 29p to 860p ahead of expected selling pressure caused by the upcoming changes to the Morgan Stanley Capital International indices. The market anticipated weakness in the shares as the indices are re-weighted on 30 November taking in account the number of shares a company has freely floating. BSkyB's weighting in the indices will slump as the group has a large proportion of its shares held by long- term shareholders. Among them is Rupert Murdoch's Sky Global Networks Inc which has a 37 per cent holding. As a consequence, tracker funds will move to reduce their exposure so as to reflect the stock's new weighting.

There was also pressure on BSkyB from broker Merrill Lynch which cut its rating to "accumulate" from "buy" on valuation. The shares have nearly doubled since the end of September when they traded at just above the 540p level.

Kingfisher rose 6.75p to 381.75p as investors anticipated the group's third-quarter trading statement today. Respected retail analysts Nick Bubb, at SG Securities, was heard to have upped his price target to 405p from 360p and reiterated his "buy" rating. Airtours rose 41p to 250p while rival First Choice improved 16p to 136p as Goldman Sachs initiated coverage of the duo with a "market outperform" rating. The broker reckons both will be able to weather the downturn in wake of the US terrorist attacks.

The recently demerged mmO2 had its first day of dealings in the FTSE 100. The stock finished up 4p at 84p in volume of more than 400 million shares, which topped that achieved by Vodafone the index's biggest and traditionally most heavily traded share. Supporting the gains at mmO2 was Banc of America Securities which initiated coverage with a "buy" rating and a 115p target price. The broker said that although worries about the group's Viag unit in Germany and non-inclusion in the MSCI index may weigh on its valuation in the short term, on a medium-term basis investors should see a healthy return.

Standard Chartered was 70.5p better at 870p as the perennial rumours of a bid resurfaced. Market talk was that an offer for the group is more likely given the impending departure of chairman Sir Patrick Gillam with Barclays, Lloyds TSB and Citigroup seen as the most probable predators.

Publisher Reed International fell 5p to 595p as it emerged that its US education division Harcourt will not be bidding to have the state of California implement its suggested reading programme. Analysts estimate this could result in about $40m (pounds 28m) of lost sales at the division and have the knock-off effect of causing flat growth for 2002 compared to previous forecasts of about 4 per cent.

The FTSE 100 rose 47.0 points to 5,338.0 while the FTSE 250 firmed 87.2 points to 6,011.0. Marconi had another session of strong gains in very high volume rising 6.25p to 40.50p. As rumours of a leveraged buyout subsided dealers explained the rise as a bout of bargain hunting. Serco was not so lucky dropping 33.5p to 421.5p as Commerzbank Securities slashed its rating to "reduce" from "hold" arguing that recent stock gains have gone far enough.

Mining stocks were in favour as investors were excited by speculation of consolidation in the sector. Reports that Anglo Gold, part of Anglo American, may make a move for Australia's Normandy Mining led to hopes of wider consolidation and moved traders to hit the buy button. Hence BNP Billiton rose 12.5p to 332.5p, Anglo American improved 31p to 1,031p and Lonmin rose 31p to 951p.

Amid the small caps Durlacher rallied 3.25p to 8p although US broker Lehman Brothers was seen dumping 750,000 shares at a mere 4.

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