Market Report: Return of the small investor breeds caution

THE DEVALUATION excitement just about lingered on yesterday, despite a crash landing by British Aerospace.

Although shares ended marginally lower trading was again active with continuing signs that some of the fourth division stocks were attracting the attention of small investors who appear to have been encouraged by the past week's display of strength.

In recent years the stock market has become convinced that the little man invariably buys at the top of the market and when he appears it is time to proceed with extreme caution.

There is little doubt that the small investor is back and some of the private client stockbrokers, largely ignored since the election euphoria, are finding business brisk and profitable.

Turnover remains impressive, if down from its peak. Bargains approached 29,000 with a volume of 735.4 million shares. The FT-SE share index was at one time up 17.9 points; it closed 5.5 down at 2,580.5.

If BAe's disastrous results had been a little earlier, Footsie would have suffered a further 2.1 reverse. But the aircraft and car manufacturer was a casualty of the last revision, losing its place on Friday.

At one time the shares had almost halved to 100p and there was talk that at least one securities house thought they should go even lower. The price, encouraged by the yawning possibility that a takeover marauder would find the vulnerable group too tempting a target to resist, ended at 113p in heavy trading.

General Electric Co, the favoured candidate to rescue BAe, fell 9p to 233p. Other aerospace shares were caught in the BAe downdraught. Rolls-Royce fell 5.5p to 136.5p; Lucas Industries 11p to 90p and TI Group 14p to 317p. Vickers expected to report a pounds 6.5m interim loss today, lost 9p to 79p.

Williams Holdings was another weak spot. The story it was set to buy Thorn EMI's security side resurfaced. Any such deal could involve a rights issue. The shares retreated 14p to 276p.

BET, the business services group, was under pressure. Profit downgradings left the shares 9p down at 110p. Barclays de Zoete is one securities house to revise its figures. For the current year it has cut from pounds 130m to pounds 100m and for next from pounds 150m to pounds 140m.

Drug shares were ruffled by the weakness of the US dollar against the Japanese yen and stories Wertheim Schroder, the US securities 42.5 per cent owned by Schroders, had turned negative on Wellcome.

Glaxo Holdings fell 19p to 797p, SmithKline Beecham 24p to 504p and Wellcome 32p to 955p. Even Fisons, everyone's takeover favourite, lost ground, down 5p to 183p.

London International Group slipped 5p to 195p with Smith New Court rumoured to be unenthusiastic.

Thames TV slipped 2p to 139p. There is talk of a cash raising operation to help fund the new TV channel, UK Gold. A US TV company is likely to link with Thames and the BBC and other investors to fund the venture which will screen repeats. It seems unlikely that Thames, which surrenders its TV franchise at the end of the year, will seek more cash from the market.

Barratt Developments, the housebuilder, celebrated its return to profits with a 17p jump to 67p.

Smaller oils did well, helped by an upbeat analysts meeting by Clyde Petroleum following a plunge into losses.

Clyde rose 4.5p to 36p; Hardy 8p to 100p and Monument 2.5p to 40p.

Airbreak Leisure, the troubled holidays group, had an erratic session. At one time the shares halved. They closed 4.5p down at 11p. The turbulence was caused by proposals which could lead to a Cyprus group, Champion Holdings, acquiring up to a 47.07 per cent stake.

Behind Champion is Takis Shacalis who was an Airbreak director until earlier this month.

Gresham Telecomputing held at 32p. Director Alan Davies has sold 1.1 million shares (3.29 per cent) for 'personal reasons'. He still has 6.23 per cent and said the market would be 'reassured' when the identity of the buyer was revealed.

Amstrad gained 3p to 28p on the proposed Alan Sugar buyout.

The stock market paused for breath yesterday, although trading remained brisk. The FT-SE share index ranged from a 17.9-point gain to an 18.2 loss and closed with a 5.5 deficit at 2,580.5. The FT 30-share index lost 8.3 to 1,901.8. Volume was 735.4 million shares with nearly 29,000 bargains. Inflation nerves pushed gilts lower.

JMD Group, the greeting cards group once called John Michael Design, has been chosen as the comeback vehicle for the men who used to run Cityvision, the Ritz video chain, taken over by Blockbuster Entertainments Corporation. JMD is raising pounds 3.9m via a placing and open offer to create a chain of computer and video shops. The shares doubled to 4.5p.

HSBC Holdings is reshaping its stockbroking operations following its takeover of Midland Bank. Greenwell Montagu is to join James Capel while Allied Provincial, where Capel has a 24 per cent stake, will take over the Smith Keen Cutler operations in Birmingham and related businesses at Hereford and Lymington, Hampshire. 'A number of redundancies' will occur.

Interest is growing in Sheldon Jones, which is hoping to become a force in the pet food business with its Pasco's brand under new chief executive David Gwyther, ex-Showerings. Stockbroker Rowan Dartington expects a pounds 400,000 loss to be revealed tomorrow. It then forecasts profits of pounds 300,000 to be followed by pounds 600,000. The shares were unchanged at 51p.