Financial Times: Whispers about Chinese interest bolster BG Group

By Neil Hume and Robert Orr
Published: October 17 2007 03:00 | Last updated: October 17 2007 03:00

BG Group , the oil and gas exploration group, was in demand again yesterday, and record crude prices were only part of the reason.

Its shares gained 2.1 per cent to a record high of 914p amid rumours of a stakebuilding operation through a large US investment bank.

In August, the People’s Bank of China paid £125m for a 0.5 per cent stake in BG, which is seen as a take-over target for a number of large oil companies.

Brokers said it was possible the PBC was buying more stock, and noted that trading volumes in the past week had been above average.

It was a good day for the oil sector as the US crude price rose above $88 a barrel for the first time.

Royal Dutch Shell improved 1.3 per cent to £20.81, while BP firmed up 0.7 per cent to 627p.

But those gains could not prevent leading shares from ending down on the day.

The FTSE 100 closed 30.2 points, or 0.5 per cent, lower at 6,614.3, weighed down by a weak opening on Wall Street and further losses in the banking sector, where Royal Bank of Scotland lost 2.3 per cent to 514½p and Barclays dipped 1.8 per cent to 615p.

Several factors unnerved banking stocks. Credit Suisse warned on the outlook for the UK mortgage market; there was a rise in three-month sterling interbank lending rates; and there were further losses for a US subprime mortgage index.

Northern Rock , up 3.4 per cent to 223½p and Alliance & Leicester , 2.8 per cent higher at 775p, bucked the weak trend. Traders believe A&L could be vulnerable to a bid after share price weakness. The mortgage lender has fallen 30 per cent in the past three months.

Lower down the market, the FTSE 250 lost 73.7 points, or 0.6 per cent, to 11,366.2.

Johnson Matthey , the precious metals and pharmaceuticals group, carried the market lower. Its shares fell 4.7 per cent to £17.53 as investors locked in profits. JM shares hit a record high on Monday amid rumours of a £20 a share bid approach.

Reheated private equity rumours helped Wolseley , the plumbing and building materials group, add 2 per cent to 815p.

DSG International , the parent company of PC World, fell 2.2 per cent to 132.3p. JPMorgan said it was concerned tomorrow’s trading statement would show a notable deterioration in sales growth over the past eight weeks.

Among the mid caps, Alfred McAlpine added 1.1 per cent to 538p after revealing it had rejected a 570p cash and share bid approach from Carillion , down 6.1 per cent to 389p.

Traders said the approach was likely to flush out other offers and said private equity group 3i , off 2.2 per cent at £10.53, Balfour Beatty , down 0.2 per cent to 479½p, Skanska, and Vinci could all be interested.

QXL Ricardo , the online auction house, added 2.8 per cent to £12.90 after Citigroup started coverage with a “buy” rating and £14.40 target price in a report on the e-commerce sector. The broker was less enthusiastic about Moneysupermarket , the comparison website, which it rated a “hold” with a 210p target price.

Citi said sharp competition would require Moneysupermarket to raise its advertising spend. The shares, which listed at 170p in July, eased 1.9 per cent to 185½p.

Spirent Communications , the telecoms testing group, was marked 5.4 per cent lower at 61¼p after a profit warning from Ericsson of Sweden.

Inmarsat , the satellite communications group, fell 2 per cent to 499¼p after a block of 22.7m shares, about 4.9 per cent of the company, changed hands at 496p. Traders think the seller might have been KDDI, a Japanese telecoms group that was one of Inmarsat’s pre-float backers. Inmarsat shares have enjoyed a great run since they listed at 245p in June 2005.

Rightmove , the property website, hit 585p in early trading but faded to close just 1.6 per cent higher at 568½p after UBS attempted to find buyers for 6.2m shares, or 4.8 per cent of the company.

Berkeley Group , the housebuilder, added 2.8 per cent to £16.48 as rumours of stakebuilding by the Qatar Investment Authority triggered a flurry of short covering. More than 27 per cent of Berkeley’s issued share capital is on loan.

Copyright The Financial Times Limited 2007

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