Aberdeen retreats on sell advice

Aberdeen Asset Management was among the sharpest fallers on Friday after Merrill Lynch advised selling.

The uptick in emerging markets from mid March is unlikely to help Aberdeen, which is likely to keep suffering equity outflows before 2017, Merrill said. Earnings will lag behind peers due to the group's fund underperformance against benchmarks, its underweight position in China and exposure to US rate rises.

Yet Aberdeen has been the sector's best performer in the year to date, rising 15 per cent, even though it will see little of the benefit other asset managers have enjoyed from quantitative easing-driven demand, Merrill added. Its downgrade to "underperform" sent the shares 2.9 per cent lower at 473.6p.

The FTSE 100 closed up 0.2 per cent, ahead 17.03 points to 7,070.70. HSBC accounted for 13 points of the move, up 2.8 per cent to 629.7p, in response to its threat to leave Britain.

While dodging the UK bank levy would add 6 per cent to HSBC's earnings in 2017, the bank's $2.8tn of assets is nearly nine times Hong Kong's gross domestic product, Morgan Stanley said. Even if HKMA, the local regulator, had the wherewithal to cope with HSBC it would probably impose "exceptionally conservative regulation", including a raised capital buffer, the broker said.

BAE Systems rose 2.3 per cent to 515p on news it had started a strategic review having had approaches for its US manpower and services-based businesses. The units up for disposal will generate sales of about $1.7bn this year on an operating margin in the high single-digits, said analysts, who saw the proceeds of any sale likely to be used for a special dividend.

AstraZeneca lost 1.7 per cent to £47.50 after its underlying earnings disappointed. While headline figures from AstraZeneca beat consensus forecasts, the beat was on one-time items - all of its growth platform drugs were weaker than expected.

Merlin, the Legoland owner, faded 1.4 per cent to 447.5p after JPMorgan Cazenove advised taking profit. Growth prospects remain attractive but, with last year's Lego Movie creating a tough comparison period for results next month, the scope for near-term upgrades looks limited, JPMorgan said.

Having spiked on Thursday on an agreed bid from US peer Arris, Pace drifted 2.5 per cent lower to 436p.

"We don't believe another bidder will emerge," said Liberum, which saw an 11 per cent discount to the implied take-out price as appropriate given the antitrust risks. "Other major [set-top box makers] such as Cisco or Technicolor are unlikely to be interested in acquiring Pace. They have stronger core businesses."

Kaz Minerals led a mining rally, up 8 per cent to 253.4p on nearly four times the average daily volume, ahead of a trading update on Thursday.

Talk of a balance sheet restructuring helped lift C&W Communications 4.4 per cent to 69.6p. Jefferies forecast that, by using its duopoly status in the Caribbean to refinance expensive debt, C&W could fund a buyback that would cut its share count by 30 per cent.

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