By Investment Week staff UK market trading volumes are at almost twice last year's level as fund man...
By Investment Week staff
UK market trading volumes are at almost twice last year's level as fund managers move to get their portfolios in line ahead of the Christmas and New Year period. These volumes should drop heavily from this week, assuming last year's pattern is repeated.
Since 29 November, the trading volumes on the London Stock Exchange have leapt from £1.6bn to more than £2bn a day by 9 December 1999. Over the same period last year the market was at £942m as of 27 November and increased slowly to £1.1bn by 10 December 1998. The market then stayed steady at £1.1bn until 18 December, where volumes fell, reaching £198.5m by 30 December 1998.
According to Adrian Fitzpatrick, head of dealing at Scottish Equitable Asset Management, outperforming fund managers tend to move to a neutral position on their stock weightings in the lead-up to year end to avoid the adverse effects of any market volatility.
He added that other managers tended to position themselves for a mini bull market in the new year during the December period and this year that positioning was taking place a week to 10 days earlier than in 1998 due to worries about the millennium bug.
He said: "This is why we are seeing so much market liquidity and volatility at the moment.. After about 15 December things will calm right down and volumes will drop off a cliff. There will be some dealing but most do not want to be as you could be dealing against yourself by forcing the prices in a low liquidity market."
Tony Whalley, investment director at Scottish Widows, said: "A number of fund managers would have made changes to their portfolios earlier because of the greater volatility in the market as a result of low turnover."
Scottish Widows said it would be open as usual over the holiday and would be prepared to do business. However, it would keep an eye on any potential problems such as emerging market exchanges.
While trading will continue throughout the Christmas season, with the exception of bank holidays, many fund managers have been cautioned to restrict their dealings to only necessary trades.
Legal & General, Royal & SunAlliance, Hill Samuel, Baillie Gifford, Newton and Perpetual are encouraging their managers not to trade stocks unless it is necessary.
Lynn Hunter, technical adviser at Autif, said: "Individual companies will have to make the decision themselves to suspend dealing, there will be no blanket suspensions. We are not aware of any groups which have said they would suspend."
Hunter said managers who are trying to limit dealing over the holiday are being prudent.
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