Scrutineer: Aim is steady for market

Published on Friday 3 July 2009 21:27

Bowleven 64.25p -0.75p Goals 208pp +6.5p

WHILE shares in Britain's largest companies have been "pausing for breath" in recent weeks after a strong start to the year, there are signs that a renewed confidence among investors has filtered into the far reaches of the London Stock Exchange.

In the second quarter, which ended on Tuesday, the FTSE Aim All Share index, which measures the fortunes of the junior Alternative Investment Market, rose just under 29 per cent, a rate higher than any of the major main market indices.

Figures calculated by accountancy and business advisers PFK said Scottish companies on the exchange rose by an average 25.6 per cent.

With hundreds of companies on the Aim market, the reasons for the rise will vary hugely.

In broad terms it appears to reflect an acceptance that the world is not coming to an end – as we thought it might – and a perception that there is now value to be had in smaller companies.

But the figures must not be taken at face value as a certain sign that confidence has returned.

Two of the three largest Scottish Aim-listed companies, oil explorers Bowleven and Faroe Petroleum, saw shares fall during the period, despite the price of oil climbing during the period.

But certainly in the case of Bowleven, once again Scotland's largest company on the junior market after a major rights issue, the outlook is brighter now than before.

The west Africa-focused company raised 71 million in June, a long-anticipated move to give it the resources to drill in Cameroon.

Confidence in pure exploration companies virtually collapsed at the start of the year as crude prices tumbled and debt disappeared, so a placement of that scale shows a return of opportunism at the very least.

Goals Soccer Centres, the second largest Scottish company on the Aim, also raised 11m to help its expansion, a local example of investors seeing opportunities in the recession, and backing good companies to exploit them.

In 2008 it appeared for a time as though the Aim market could disappear, as takeovers and failures rose, but flotations ground to a halt.

In the short term at least, flotations are likely to stay low. Jamie Cumming, a senior investment banker at Brewin Dolphin, said recently that few investors would want to back a new listing when there was still good value to be had in more established quoted companies.

But if the rally continues, and secondary cash raisings. such as those of Bowleven and Goals, continue to be supported – both were oversubscribed – then the situation may improve.

The fall in junior market flotations does not mean there is necessarily a shortage of companies that would like the cash and the profile that the public market offers.

Continued strength on the market should lead ambitious entrepreneurs, who have historically dominated the Aim market, to break cover.

RESPECTED analysts have been saying for months that the price of oil – which has surged from lows hit at the start of the year – does not reflect demand, and yesterday we saw how much speculation can hit the price of crude.

A rogue trader at a London brokerage has been blamed for 3.5 per cent spike in the price of crude on Tuesday morning, costing his employer more than 6m.

Not only did the large positions the trader took betting on a rise in the price of oil cause a spike in trading, the situation was worsened when many other traders attempted to profit from the unexplained rally.

Such was the scale of the rise, some observers were apparently convinced it was caused by a geographic event such as a collapse in infrastructure or a major explosion.

Before the banking crisis hit, traders speculating that commodity markets would rise or fall were blamed for a massive rise in the price of basic food items.

Food inflation fell as the recession hit, and with it calls for a crackdown on speculation.

Perhaps the actions of a PVM Oil Associates trader will re-ignite the debate.

HUMOROUS e-mails form a large proportion of web traffic in the City on a Friday, but the laughs rarely come from analyst research.

Yesterday Brewin Dolphin analysts Sahill Shan and Chris Glasper came up with an assessment of the trends affecting private healthcare provider Southern Cross, and advice to sell the shares, which was simple, pithy and funny.

"Southern Cross: Heatwave + Swine Flu > Bad News – REDUCE".