Pubco shares hit as gloom continues

The sun may have been shining today but investors caught a chill as shares across a range of sectors dived once again.

The stock market took the news of the country's manufacturing well-being sinking to its lowest level since the bear market of 2001 badly.

A number of leisure sectors continued their downward spiral, with pub stocks among the losers.

Punch Taverns was the worst affected, at one stage falling more than 15 per cent to below 270p, although it was showing signs of a slight recovery towards the end of the day's trading.

Observers suggested the fall is part of a vicious circle being created by some short sellers, with a gap between what the stock market believes is happening and what companies are saying.

Speculation about the debt position of a number of leading listed pub groups is continuing, despite assurances from the likes of Punch chief executive Giles Thorley, who last week said his company would not need to restructure its finances.

Punch's shares also fell dramatically last week as some City analysts questioned the group's prospects, prompting the pubco to bring forward the publication of its interim management statement by two weeks.

Other pub stocks were hit today, notably Enterprise Inns, down 5.8 per cent; Greene King, down 5.3 per cent and Marston's down 5.2 per cent.

Short selling is effectively where an investor borrows shares from his or her broker and then sells them, usually in the expectation - or hope - that the price will continue to fall. Assuming the stock price falls to a pre-determined level, the seller then buys back the shares at the lower price and returns them to the broker, the profit being the difference between the two prices.