LONDON MARKET OPEN: FTSE 100 drops to two-month low; Prudential sinks

(Alliance News) - Stock prices in London opened lower on Monday after a sell-off in Hong Kong, while Prudential shares sank after outlining plans to raise funds on the Hong Kong stock exchange.

The FTSE 100 index was down 61.42 points, or 0.9%, at 6,901.40 - its lowest level since mid-July. The mid-cap FTSE 250 index was down 198.38 points, 0.8%, at 23,460.56. The AIM All-Share index was down 4.30 points, 0.3%, at 1,271.44.

The Cboe UK 100 index was down 0.6% at 686.40. The Cboe 250 was down 0.7%, at 21,210.30. The Cboe Small Companies was 0.4% lower at 15,492.69.

In mainland Europe, the CAC 40 stock index in Paris was down 1.6% and the newly-expanded DAX 40 index in Frankfurt was down 1.7%.

In Asia, the Hang Seng index in Hong Kong was down 3.4%. Financial markets in Japan were closed on Monday for the Respect for the Aged Day holiday, while in Shanghai, the stock market was closed for the Mid-Autumn Festival. The S&P/ASX 200 in Sydney ended down 2.1%.

The Hong Kong stock exchange tumbled Monday over fears of a contagion from the potential collapse of Chinese real estate firm Evergrande Property Services Group, as it struggles under a mountain of debt.

The firm, one of the country's biggest developers, warned it may not be able to repay loans and interest on its bonds - totalling more than USD300 billion - and could go under. With some payments due Monday and Thursday, investors are keeping a nervous eye on the crisis, which has fanned fears of a domestic and international contagion.

Evergrande shares were down 12% in Hong Kong.

"In opening exchanges, the UK markets reflected the current wariness, propelled by further falls in the Hong Kong market, although without direction from the closed Japan and China indices. Even in its absence China's impact was felt on the FTSE 100, with further weakness in mining stocks as well as companies with a higher exposure to the region, such as Prudential, Standard Chartered and Burberry," said interactive investor's Richard Hunter.

StanChart and Burberry were down 3.1% and 3.0% respectively.

In the FTSE 100, Prudential was the worst performer, down 5.8%. The life insurer on Sunday said it plans to raise up to around USD2.89 billion on the Hong Stock Stock Exchange.

Prudential is planning a share offer of up to 5% of its issued share capital, or around 130.8 million shares, at a price of no more than HKD172 each, equivalent to around USD22.09.

The offer will consist of a international share placing and a public offer available only to residents of Hong Kong, both at the same price. The public portion will be for up to 32.7 million of the total shares on offer.

Prudential said it wants to increase its Asian shareholder base and the liquidity of its shares in Hong Kong.

The 173-year old insurer last week completed the spinoff of US arm Jackson Financial and declared a demerger dividend. The company still owns 20% of Jackson, and plans to cut its stake to less than 10% over the next 12 months.

Anglo American was down 5.1% after Barclays downgraded the miner to Equal Weight from Overweight.

Conversely, AstraZeneca was up 2.6%. The Anglo-Swedish drugmaker said its Enhertu breast cancer drug reduces risk of progression or death by 72% compared to existing treatment trastuzumab emtansine.

SSE was up 0.4% after it noted a report in the Telegraph that said the energy firm was close to being split into two separate blue-chip companies, following pressure from US activist investor Elliott Management.

Elliott has been in talks with SSE's board to split the company's legacy wholesale networks business from its growing renewable energy operations for more than a year, according to the Telegraph, citing sources close to the situation.

In response, SSE said "there has been no decision to break up" the company. SSE remains fully focused on strategic choices which will "drive shareholder value from the wealth of net zero opportunities", it insisted. SSE said its strategic focus was on renewables and regulated electricity networks, supported by "carefully chosen" businesses.

Meanwhile, the latest FTSE Russell index review changes came in effect on Monday with Wm Morrison Supermarkets and Meggitt joining the FTSE 100, replacing Weir Group and Just Eat Takeaway.

Morrisons and Meggitt were down 0.6% and 0.3% respectively.

The pound was quoted at USD1.3683 early Monday, down sharply from USD1.3752 at the London equities close Friday.

The euro was priced at USD1.1715, down from USD1.1734. Against the Japanese yen, the dollar was trading at JPY109.78, down from JPY109.92.

Brent oil was quoted at USD74.48 a barrel Monday morning, down from USD75.06 late Friday. Gold stood at USD1,751.46 an ounce, slightly lower from USD1,754.70.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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