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Market Report: Housebuilders take a hit as HSBC warns buyers will dry up

Published Jul 09, 2010 at 12:35 -

HSBC advised investors to “exit ahead of subsidence”, predicting that the five companies with the greatest exposure to the North of England will see their share prices fall by between 5% and 35% in the next year.

City gossips were also concerned by talk that a European retail bank would fail the stress tests. On a happier note, Gary Jenkins at Evolution Securities argued that it will be good news for the stock market whether Holland or Spain wins on Sunday, as shares have performed very well in the two years when there was a new World Cup winner on foreign soil.

South America-focused copper producer Antofagasta climbed 28p to 879½p and Anglo American added 14½p to 2426½p as Goldman Sachs said that investors should snap them up in advance of an expected surge in metal prices at the end of the year.

Rio Tinto jumped 108p to 3181p as UBS analysts said buy, expecting the metals behemoth to report an improved performance when it updates the market next week.

Positive second-quarter trading update

BuyROBERT WALTERSFollowing a positive second-quarter trading update by headhunter Robert Walters, Merchant John East Securities upgrades the stock to buy. The analysts have raised their full-year, pre-tax profit forecast for 2010 by a huge 42% on the back of an improving market, and are now predicting it will rake in £10.25 million in the year.

SellPersimmonDump shares in housebuilder Persimmon, advise analysts at HSBC. The firm this week warned that Britain's housing market is unlikely to bounce back until mortgage availability improves — with chief executive Mike Farley saying the bank loans industry “has got a long way to go” before a return to normal. HSBC gives a 278p target.

The European business of US activist investor Richard Breeden has been buying up shares in distressed social housing repair group Connaught. Co-op asset management, formerly the second-largest investor in the group, has sold almost its entire holding in the group which is still reeling after a shock profit warning at the end of last month. Breeden's European Ventures group bought eight million shares, bringing its stake to 13.05%. With 18,240,821 shares, that means his holding is worth £20.4 million. Breeden was chairman of the American Securities and Exchange Commission from 1989 to 1993. He set up his business to invest in undervalued companies and press management to make changes. He didn't have to wait long with Connaught. Just days after the deal was done, Connaught's chief executive Mark Tincknell and finance director Stephen Hill announced their intention to step down from the board. With shares still 65% lower than their pre-warning level of 322p, Breeden's team clearly think this is a turnaround story they can't afford to miss out on.

Domino's Pizza will be posting its first-half figures. Investors expect the company to have received a leg-up from the lazy diners ordering in during the World Cup, as well as its ongoing sponsorship deal with TV favourite Britain's Got Talent.

Immunodiagnostic Systems, a pharmaceuticals firm specialising in diagnostic testing kits, will post its preliminary figures. The drugmaker has given shareholders a host of positive news in recent weeks, including the share-moving announcement that it won regulators' approval to sell some of its flagship products — including an automated immunoanalyser — to the large US medical market. Analysts described the approval as a “hugely important milestone” that should help drive further sales into the key US market where, Brewin Dolphin noted, “revenues from manual products have been doubling year-on-year”.

Invista Foundation Property Trust, a Guernsey property investment company, posts its preliminary results. It has recently been on a spending spree of commercial properties and shareholders will be waiting to hear of the expected returns.

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