PRIVATE investors reacted to the recent lurch in the stock market by dumping an estimated net £6 billion of British shares, a significant intensification of their withdrawal from equities this year, reports the Times .
The paper says research by Capita Registrars, which looks after the share registers of 100 of the biggest 350 listed companies, suggests small investors have sold a net £10bn of shares since February.
Sales by individuals outweighed new purchases by £3bn in February and March, by £1bn in April and May and by £6bn in June and July.
The sell-off this year is now equivalent to 5% of individual direct shareholdings and reduces the proportion of the entire market held directly by UK private investors from 12% to 11%.
John Roundhill, director of Capita, said the 600-point fall in the FTSE 100 in May and June had given investors a jolt. “They may have been using the recent bounce in the stock market as an excuse to trim their holdings and lock in some of the profits they made during the bull run.”
He also suggested that investors might have used the proceeds to pay down consumer debt, which is falling for the first time in a decade.
The biggest exit was from the financial sector, with small investors selling a net £1.7bn of bank and insurance shares. Next came consumer services, including retailers and pubs and restaurants, with a net £1.5bn of shares sold. The most deserted sector, after adjusting for the size of overall holdings, was healthcare.
However, while the overwhelming trend is still to shun equities, net purchases in oil and gas, consumer goods and information technology for June and July hit a record.
Roundhill said: “Consumer goods companies were the top-performing sector and recent reports on retail sales show that food and drink sales have been extremely strong through the World Cup and subsequent heatwave. The oil and gas sector is benefiting from the continuing high energy prices, too.”
Capita began to analyse private investor buying and selling patterns only this year, but Roundhill suspected that the summer sell-off had been one of the most intense periods of net selling for some time.
Capita identifies private investor deals in a sample that captures the activities of 1.6m private investors, then scales up the results to represent the entire market. Private investors now own £192bn-worth of shares directly, as distinct from holdings through unit trusts and pension funds.
The number of direct shareholders has shrunk since the boom years of privatisation in the 1980s and then demutualisation in the 1990s when millions of stock market novices were created. However, the numbers were boosted last month when the flotation of Standard Life gave shares to 2.6m policyholders.
INHERITANCE TAX should be scrapped because it is a "penalty on hard work, thrift and enterprise" and has become an electoral liability for Labour, Stephen Byers said yesterday.
The Financial Times reports that although the threshold had been raised to £285,000, there were now more than 1.5m homes that would make their owners liable for the tax, said the former cabinet minister.
Rising house prices would make thousands more liable before the next general election. Many such homes were in key marginal constituencies, Byers added.
THE LATEST INDICATION that the rise in house prices is slowing comes today from Rightmove, reports the Guardian.
It says house prices, which only two months ago were steaming ahead at the fastest rate for five years, are now falling at their fastest rate for almost two years, with the south-east heading the list of the biggest fallers according to the website.
The turnaround in fortunes, confirmed by recent surveys from Halifax and Nationwide, could be blamed on the Bank of England's decision to raise interest rates by a quarter point at the beginning of the month to 4.75%.
Increasing problems with affordability, after a strong surge in prices for most of this year, were also to blame for the downturn, said Rightmove. The asking price for the average house fell 1.6% to £214,040 in August, giving an annual growth rate of 9%, it said. In July it stood at 10.6%, after a 2.9% rise over the month in the asking price of the average home.
The company said much of the rise, and later fall, had been dictated by a mini-boom, followed by a slowdown, in the largest property markets of London and the south-east. The south-east dipped by 3.6% over the last month, while London slid by 1.5%. The south-west fell 2% and the north declined by 1.5%. Areas of the country that continue to grow include East Anglia, which saw a 2% rise, and Wales which grew by 1.1%.
Halifax cooled the top of the market in London and the south-east in July, when it warned that householders were feeling the pinch from higher utility bills and fears that interest rates were likely to rise.
Halifax and Nationwide figures, which heralded the fall in prices, are based on surveys showing how much homebuyers actually paid. Rightmove, by contrast, concentrates on asking prices. The lag between the two sets of figures is believed to result from sellers maintaining asking prices, despite deteriorating market conditions through July. They are only dropping prices once it becomes obvious buyers are unable to meet their expectations. Rightmove's commercial director, Miles Shipside, said: "Prices have passed their peak for 2006. The record price levels seen so far this year were driven by the south of the country.
"With that market cooling, and the signals from the Bank of England that interest rates may move up again, sellers may have to reduce their price expectations."
He said the decline in price growth was welcome news for homebuyers, many of whom were priced out of the market by the recent boom. Concern that the decline last month will snowball into a fully fledged slump looked misplaced. All the main lenders believe a rise in interest rates to 5% is unlikely to have a big impact. Mr Shipside added: "Activity in the property market virtually stopped dead after two successive rate rises in 2004 and took a year to recover. Prices are now cooling off and require no further intervention from the Bank."
Figures from the Council for Mortgage Lenders last week revealed record lending in July, with more than a half of borrowers protecting themselves from further rises by opting for fixed-rate loans.IFAonline
HL and Liberty SIPP slowest
Lifetime and annual allowances
'IFAs bore the brunt'
'Recovery or boom'