FTSE 100: Aviva plc exists Chinese fund sector, Xstrata plc share price at 9 pct discount on GLEN offer

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Category: The FTSE 100 Report

Published on Thursday, 13 September 2012 12:08

Written by Sam Coventry

Stock Markets at Noon: The FTSE 100 (INDEXFTSE:UKX) is 0.06 pct in the blue at 5,785.75 at 12:55 in London. The market is lying in wait for the US FOMC to announce its decision. But beware, disappointment lurks:

"What we are likely to see is an extension to the period of ultra-low interest rates, but we would need to see something fairly impressive if the Fed is to avoid creating a wave of disappointment," warns Chris Beauchamp at IG Index, the spread betting company.

But Beauchamp balances his position by warning that we shouldn't write off the outcome already:

"The trend from the important announcements of late, be they from the ECB, a German court or Ben Bernanke, has been broadly positive, and today's Fed meeting could help to top off what has been a reasonable late summer for markets."

Turning to the individual players we see Aviva Plc (LON:AV) is under-performing the FTSE 100 as the company announces it is to exit the Chinese fund sector.

Aviva has quit a planned asset management venture with Central China Securities Co, the source who had direct knowledge of the deal.

Reuters reports that in Aviva's place, UK-based money manager Ashmore Investment Management will partner Central China Securities in the fund joint venture, China's securities regulator said.

The venture still awaits regulatory approval.

Foreign financial firms, including leading ones such as HSBC, Morgan Stanley and UBS have jumped into the Chinese funds market over the past decade, lured by the promise of economic growth and rapid wealth creation.

But while the number of funds on offer has more than tripled since 2007 to over 1,000 now, the industry's total assets are down by a quarter over the same period, reflecting in part the sliding stock markets.

That has led to intense competition among the 73 players in the industry.

Meanwhile, we have more insights into the ongoing soap opera that is the Xstrata PLC (LON:XTA) and Glencore International Plc (LON:GLEN) merger negotiations.

Analysts at Fairfax IS, the mining sector broker, have advised:

"The revised offer shows Xstrata’s current share price to be at a 9% discount to the offer.  This discount could widen if shareholders question the new management structure.  Investors might consider taking profits ahead of potential dissent amongst Xstrata shareholders."