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BHP Billiton rally caps stellar week for FTSE

BHP Billiton rally caps stellar week for FTSE

BHP Billiton (BLT) has helped drive the FTSE 100 towards its biggest weekly gain in six months, as the miner announced its intention to spin off manganese and nickel assets.

BHP Billiton rose 2.8% to £20.82, contributing to a 44 point, or 0.7%, rise for the index, which reached 6,729 points. That has set it on course for a 2.6% weekly rise, the biggest since February.

Citywire AAA-rated fund manager Henry Dixon, who holds BHP Billiton in his GLG Undervalued Assets fund, spoke recently of the stock allowing him to target a ‘conglomerate discount’ from companies looking to restructure.

‘Within big conglomerates, some parts of the company are not being valued by the market,’ he said. ‘BHP Billiton is unlocking hidden value through non-core disposals.’

However, analysts at Liberum were more sceptical about the potential for further share price rises from the move. ‘We understand the rationale for the portfolio simplification – it will create a simple, diversified miner with the best margins and return on capital employed in the sector over the long run,’ they said. ‘However, we’re not convinced it is necessarily value accretive.’

Speaking after the stock had rallied in Australia on the news, they said the upside was ‘probably baked in’ to the price.

The Office for National Statistics meanwhile further underlined the contrasting fortunes of the UK and the eurozone, when it published its second estimate of UK gross domestic product (GDP) growth in the second quarter. At 0.8% it stands unchanged from the first reading and compares to no growth in the eurozone over the same period.

‘The UK has enjoyed a period of consistently strong growth since the start of last year, during which the economy has grown some 3.8%,’ said Chris Williamson, economist at Markit.

‘The second quarter upturn was notable in finally pushing GDP 0.2% above its pre-crisis peak, reached in the first quarter of 2008.’

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Henry Dixon
Henry Dixon
17/98 in Equity - UK Equity Income (Performance over 1 year) Average Total Return: 12.36%
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