British American Tobacco plc  (BTI)  shares edged higher Wednesday even as investors eyed ongoing weakness in some of its core markets following what was otherwise a solid trading update for the first half of its financial year.

The tobacco group, which will soon be the world's biggest once its $50 billion merger with Reynolds American (RAI)  is complete, said volumes for the six months ending on June 27 will be impacted by strong comparative numbers in the prior year period and that conditions remain challenging in key markets such as Brazil, South Africa, Malaysia, France and the U.K.

However, the company also said that its performance in other markets such as Canada, Romania, Bangladesh and Ukraine has been strong and that, for the full year, the board expects that BAT will outperform the market on cigarette volumes sold.

In addition, earnings per share for the first half are likely to benefit from a 14% foreign exchange related boost while, for the full year, BAT's could see earnings rise by 13% on currency effects alone. Profit will be weighted toward the second half of the year given the timing of capital expenditures and marketing spend.

BAT shares slipped by 0.2% to 5,425 pence during early trading in London, adding a fraction off their 17% year-to-date gain, before trading back into the black with a gain of 0.10% by 08.30.

"BAT remains our top long term pick with the multiple remaining attractive in our view, with evidence to suggest that the most recent re-rating has been driven by Reynolds vs. the underlying business," said Owen Bennett, an analyst at Jefferies.

BAT is in the process of completing a $49.8 billion deal to buy the 57.8% stake in Reynolds American that it does not already own. The London based company received approval from antitrust officials in Japan back in April and cleared a similar regulatory hurdle in the US back in March.

The merger will reorient BAT away from developing economies, which are low-margin and increasingly competitive, and toward developed markets.

It will also see the world's second-largest tobacco firm by revenue combined with the fifth largest, to create a global cigarette giant that is dominant in both international markets as well as the U.S.

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