Last updated: September 5, 2013 8:47 pm

Tate & Lyle slides on China competition fears

Tate & Lyle was the biggest faller in a rising London market yesterday on fears of competition from Chinese manufacturers.

A glut of sucralose, the artificial sweetener discovered by Tate in 1976, meant prices had slumped in recent months, trade website Food Navigator USA reported. Shortages last year had attracted chemicals makers into the market, dragging prices around 25 per cent below the 2012 peak, according to a US distributor of Chinese sucralose quoted by the report.

Tate, down 1.6 per cent to 799.5p, lost patent protection for sucralose in 2009 but retains a market share of about 80 per cent, according to analysts. The company has so far fought back against generic manufacturers by offering bulk discounts to major customers, which has offset pricing pressure with volume growth.

Sucralose generates just 6 per cent of Tate’s group sales yet provides around a quarter of its earnings, thanks to its high margin and low tax via a manufacturing base in Singapore, said Citigroup. While Chinese competitors have often exaggerated their plans to grow capacity, investors should expect no clarity on price and volume trends until Tate’s trading update due in October, the broker said.

A choppy market left the FTSE 100 edging to a three-week high, up 0.9 per cent or 57.7 points at 6,532.44.

Marks & Spencer climbed 3.4 per cent to 494.9p on the back of an upgrade from HSBC, which said the stock had the highest gearing among retailers to a recovery in UK spending and the housing market. M&S’s womenswear launch for the autumn season would mark the bottom of the cycle for its general merchandise business and drive an acceleration in like-for-like sales, the broker said.

Dixons was up 5.9 per cent to 46.9p on news it was disposing of its lossmaking Pixmania and Electroworld Turkey divisions on better-than-expected terms. A dowry of £58m for Pixmania was much lower than the likely closure costs of £90m, said Barclays, which called Dixons “the most credible self-help restructuring story in the sector”.

Fashion retailer Supergroup climbed 5.9 per cent to £12.27 on better-than-expected quarterly sales.

Lloyds Banking Group was up 2.9 per cent to 74.8p on reports that market volatility had led the government to reconsider its plan to reduce its stake in the lender by as early as this month.

Separately, Bernstein Research put a 100p target on Lloyds based on “a rebound in consumer confidence in the UK, an attractive market position in a closed market and a healthy risk appetite for investors in non-core assets.” Lloyds can deliver a return on equity of at least 14 per cent by 2015 with balance-sheet strength as measured by core tier one capital exceeding 13 per cent, it forecast.

Intercontinental Hotels climbed 2.1 per cent to £18.75 after UBS added the stock to its “buy” list with a £22 target price.

A Morgan Stanley upgrade lifted ICAP 6.7 per cent to 400p. Rising rates and volatility made market infrastructure providers better value than fund managers, it argued, with the broker choosing as its preferred pick London Stock Exchange , up 2 per cent to £16.01.

“The period of strong outperformance of asset managers over exchanges and inter-dealer brokers may be over,” said Morgan Stanley. It argued that ICAP’s prospects had improved and regulatory risks had eased, yet the shares were still much cheaper than peers at a 10 per cent discount to the post-crisis average.

British Airways owner IAG rallied 2.9 per cent to 299.4p, having fallen on Wednesday after Ryanair’s profit warning eclipsed IAG’s own robust traffic figures for August.

Chip designer Imagination Technologies took on 5.7 per cent to 279.3p following news on Wednesday that Broadcom had bought Japanese chipmaker Renesas Electronics, an Imagination customer.

Broadcom and Qualcomm had been the only major wireless chip makers that did not license Imagination’s graphics designs, said JP Morgan Cazenove. “This win should give Imagination a graphics position at Broadcom and significant volume from large Broadcom customers,” it said.

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