Investors have taken heart from better-than-feared corporate news from
some of the banks and other sectors, though it has become even clearer than before how delicate an operation steering economic and financial recovery will prove to be.
Stimulated by the success of HSBC’s £12.5 billion rights issue, investors did not allow even the prospect of a near-£30 billion flood of rights issues this year across the corporate sector to stop them pushing the FTSE Index through the 4000 level in mid-April.
At times back down below that level, the index remains nearly 40 per cent below its
52-week high and less than 12 per cent above its low and no one can say we are out of the woods yet. Concern over parlous public finances may replace private sector financial woes as a market headache and yet more corporate shocks can’t be ruled out.
Bargain hunting
But the quest for bargains is showing signs of gaining ground. Companies are winning points for repairing their balance sheets, provided the terms offer significant potential gains should the market rally further and the companies involved seem able to make good use of the support.
Shares in HSBC itself at 486p are 60 per cent above March’s low, though still 45 per cent below their 2006 high. Better than expected quarterly profits from US investment banking colossus Goldman Sachs, coupled with a planned £3.3 billion share sale to repay government loans, helped sentiment on this side of the Pond.
Barclays, now selling its passive funds business to private equity group CVC for £3 billion (£150 million of it to 200 staff), has rallied fourfold to 205.75p since January. Even RBS, with US shareholders making menacing noises and yet more job cuts announced, is three times its January level at 31.4p, though little more than five per cent of its peak nearly two years ago.
Rallying from a low base
The prospect of a hefty fund raising from DSG International, parent of electronics retailer Currys, has done nothing to dampen its already depressed shares, which collapsed from 222p in 2007 to 9.49p last December and have now bounced to 33.5p. In the hard-hit house building sector, bombed-out Taylor Wimpey has followed annual pre-tax losses of
£2 billion and £1.6 billion of debts with a last-minute refinancing agreement with creditors, likely to involve a £350 million capital raising and £150 million cut in
debt facilities.
Taylor Wimpey shares, which stood at 518.5p at their peak, have rallied more
than tenfold since November, but only to 50.25p. Meanwhile, Barratt Developments has risen to 160.5p, four times its low last July but a mere fraction of its £12.89 peak in early 2007.
An unexpected fall in US retail sales for March reminded markets on both sides of the Atlantic that economic recovery is some way off. In London, shares in Marks & Spencer took a knock to 314.75p, though still 50 per cent up on November’s low, on news the company had lost market share in the key clothing sector during February, w...
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