British banks and housebuilders remained in the spotlight on the London market today after sustaining heavy falls in a late session sell-off yesterday.
Rumours swirled about prospects for Halifax Bank of Scotland’s £4nm (€5bn) cash-call to investors after shares plunged below the 275p discount price. They were still below the benchmark today, despite gaining 5p to 263p in early trading.
Its rush to reassure investors over trading and the fundraising yesterday did little to ease the share price pressure, with speculation now centring on how big a shortfall underwriters of the rights issue will face.
The wider FTSE 100 Index steadied, ahead more than 40 points in the first hour, but housebuilders Persimmon and Barratt Developments were given no relief.
Blue-chip housebuilder Persimmon was in the red again after yesterday’s 3% decline, as the share hammering endured by the sector showed no sign of easing.
FTSE 250 counterpart Barratt dropped as much as 11% this morning, which left shares down by nearly 60% since Monday.
Housebuilders have plummeted amid concerns over the sector’s prospects in the deepening housing market slump, but reports suggested that aggressive trading by hedge funds had also exaggerated the sharp falls seen by banks and builders.
The Financial Services Authority is thought to have been encouraging firms to provide updates on trading to calm investor nerves, although the City watchdog said only that it was “closely monitoring the situation”.
Barratt and HBOS released statements yesterday in the hope of halting the relentless falls.
HBOS is now facing concerns over investor take-up of its rights issue, with reports estimating that its underwriters could be left nursing more than £250 million in losses.
It could be the first big shortfall on a failed rights issue since the stock market crash in 1987 that left banks holding unsold BP stock, according to the Financial Times.