Lloyds Bank among FTSE 100 stocks investors are buying heavily today
20th September 2022 13:24
by Graeme Evans from interactive investor
Blue-chips remain volatile, but events in China and Hong Kong and anticipation ahead of the US Federal Reserve meeting are positive catalysts for these shares.
A big week for markets today swung in favour of Lloyds Banking Group (LSE:LLOY) and Prudential (LSE:PRU), while housebuilders endured more pain and Ocado (LSE:OCDO) traded at fresh multi-year lows.
Their sharp price movements came as investors braced for further substantial interest rate rises, with traders pricing in a 0.75% increase by the US Federal Reserve on Wednesday evening and the Bank of England set for a hike of 0.5% to 2.25% on Thursday.
As this tightening of monetary policy increases the chances of a hard landing for the global economy, the FTSE 100 index surrendered an initial 1% improvement to later stand in negative territory. The more UK-focused FTSE 250 was down by over 1%.
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Lloyds shares, however, continued their recent momentum by adding another half a penny to 48.31p as investors eye the margins impact of another increase in the base rate, alongside potential support for the UK economy in Friday’s mini-budget from Chancellor Kwasi Kwarteng.
Prudential shares were also higher as Hong Kong signalled plans for an “orderly opening up” through plans to change its Covid quarantine policy.
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The insurer’s targeting of Hong Kong’s high growth savings and investment markets has been hindered by some of the tightest Covid restrictions in the world, which currently still include requiring visitors from abroad to quarantine upon arrival.
In its annual results, Prudential noted that Hong Kong sales fell 27% as mainland China customers were prevented from buying insurance products in the territory.
An announcement is expected this week as part of efforts to bring more events back to the financial hub. In a further lift for Pru investors and the holders of other Asia-focused blue-chip stocks including Burberry (LSE:BRBY) and Standard Chartered (LSE:STAN), several major China cities have lifted some of their Covid restrictions in recent days.
Pru shares lifted 11.8p to 969.4p and have improved by around 10% in the month to date. Analysts continue to see plenty of upside based on comparisons with rival AIA, with Barclays (LSE:BARC) recently upgrading its price target to 1,576p and UBS opting for 1,580p.
The latter said recently: “The market currently appears to price in no growth for Pru from the first half reported new business volumes. We believe this to be extreme given Pru's operations are based in secular growth markets in Asia and Africa.”
As well as a full reopening of the Hong Kong-China border, it sees other catalysts as the approval of Pru’s Macau licence and efforts to widen the investor base in Asia.
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The Covid optimism in China also had a positive impact on BP (LSE:BP.) and Shell (LSE:SHEL) shares after the Brent crude price firmed near to $93 a barrel on hopes of stronger demand from the region.
Their gains were offset by more selling of property stocks ahead of the latest increase in UK borrowing costs. Despite the industry’s resilience in recent trading updates and the support of a large number of “buy” recommendations, Persimmon (LSE:PSN) shares fell another 79p to a multi-year low of 1,349p. They had been at 2,883p at the start of this year.
It was a similar story for Barratt Developments (LSE:BDEV), which lost 17.5p to 411.5p and Taylor Wimpey (LSE:TW.) with a decline of 3.35p to 104.2p.
The fallers board was led by grocery warehouse automation business Ocado, which shed another 49.8p to 621.2p after analysts HSBC Holdings (LSE:HSBA) slashed their price target from 1,000p to 575p. The stock topped 1,600p in January, but its valuation has been decimated by a flight from growth and tech stocks caused by rising interest rates and the uncertain consumer outlook.
Economy fears also left US-focused plant hire business Ashtead Group (LSE:AHT) high up the fallers board, with sentiment not helped by HSBC lowering its price target to 5,360p from 6,020p.
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