UK equities owned by private investors outperformed the overall market last month, according to Capita Registrars.
Figures show the outperformance, attributed to investments in small companies performing slightly better than their bigger rivals, helped private investors’ market share reach its highest level last month since September 2006.
The investors’ market share rose from 11.6% at the end of November 2007 to 11.9% in January as the overall market dropped 8.6% in December and January. The outperformance made up for a 5.8% market share fall to £209bn last month.
John Roundhill, director of Capita Registrars, says: “The stock market with its dramatic mood swings can best be described as bipolar. But private investors have played a clever game. They used the last few months of the bull market to reduce their equity holdings and to refocus their remaining portfolio into stocks better able to weather an economic, and a market, downturn.
“Although they tend to sit on their hands when the markets are very volatile, sharp downward dips prove irresistible to them, and they have made modest reinvestments. The net buying is still small however – just £1.5bn over the last six months, and compares to £15bn of net selling over the preceding year and a half."
Capita says private investors bought £1.9bn of utilities and sold £3bn of consumer services and financial stocks in the 12 months to November last year.
Roundhill says: “Financials are looking attractive on some measures, but still remain high risk. A new round of bad news from the banks on the after-effects of the credit crunch, a rapid slowdown in the mortgage market and anticipation of more bad news to come led private investors to sell more of their holdings. They have dumped more than £2bn of UK financials over the last fourteen months since the first cracks began to appear in the US sub-prime market.
“By contrast, with platinum and gold reaching record levels, oil prices riding high and other commodities buoyant too, private investors are clearly keen to capitalise on those sectors seeing good growth.”
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