Listed social infrastructure funds made a rare foray towards the top of the stock market today after a £1.4 billion bid approach for John Laing Infrastructure (JLIF) while Hargeaves Lansdown (HRGV) slid 4% after the City watchdog proposed measures to give investors on fund platforms better value for money.
JLIF shares jumped nearly 18% to 140p as the company said it was ‘minded to recommend’ a total cash offer of 146.07p per share - including a 3.57p dividend - from infrastructure fund managers Dalmore Capital and Equitix Investment Management.
The total offer is 23.6% more than JLIF’s closing price on Friday of 118.2p and highlights the value in a high-yielding sector that has tumbled following attacks by Labour on private finance initiatives (PFI), in which the funds invest, and the collapse earlier this year of public sector contractor Carillion.
HICL Infrastructure (HICL) and International Public Partnerships (INPP), which have also been hit in the sell-off this year, both rose around 5% to rank among the leaders on the FTSE All-Share index, which fell 30 points as energy stocks sank with falling oil prices.
Numis Securities analyst Ewan Lovett-Turner said the infrastructure sector ‘offers investors exposure to high quality, inflation-linked cashflows, which are difficult to replicate and we are not surprised to see a large pool of infrastructure assets being attractive to major infrastructure investors’.
He added that the premium valuation of the JLIF shares ‘sets an interesting pricing precedent for the sector as a whole’.
The bid approach for JLIF came after Paul Dreshsler, former chairman of business group CBI, warned that Labour’s pledge to renationalise utilities was discouraging investment in infrastructure.
‘For anyone in sectors vulnerable to nationalisation, this is weighing on business investment,’ he said. ‘Boards are not going to press ahead with investments faced with this level of uncertainty. It is just how business works.’
Hargreaves Lansdown, operator of the UK's biggest investor platform, was initially the biggest faller on the FTSE 100, declining 3.9% to £19.76 after the Financial Conduct Authority published its proposals for the sector. It later clawed back some ground to £20.08, down 2.4% approaching the end of trading.
The FCA said it would give investment fund platforms until next year to improve outcomes for investors before it would consider other measures, such as the banning of exit fees when customers switch to rivals.
‘We know that competition is working well for many but it is important that the problems we have identified are addressed so that consumers don't lose out,’ said Christopher Woolard, the FCA's executive director of strategy and competition.
Oil prices a drag
Overall, it was a poor start to the week for UK shares with the FTSE 100 extending its downward shift from last week, which saw the blue-chip index close 0.1% lower to 7,661 on Friday.
Today it slid 68 points or 0.9% to 7,594 after China reported a dip in economic growth in the second quarter, depressing metal prices and shares in mining companies.
Oil prices tumbled on renewed trade war fears between the US and China and political uncertainty as president Trump met Putin, his Russian counterpart in Helsinki.
Brent crude futures dropped $2.62 to $72.65 a barrel, knocking Royal Dutch Shell (RDSb) 2.4% lower at £26.66.
Micro Focus International (MCRO) was in focus again as the software company responded to growth anxieties with a 3.25% slide to £12.37.
The pound was virtually unchanged against the dollar on the day at $1.3231 after initially rising 0.28% to $1.3269 after former Conservative minister Justine Greening revived hopes of a soft Brexit with a call for a second referendum on the UK's withdrawal from the European Union.
Indivior (INDV) was once again the top riser on the FTSE All-Share index, soaring 19% to 347p after a US court blocked a rival company from selling a generic version of its opioid addiction treatment.