Private investors’ holding in UK equities at record low - Capita Registrars
The year 2008 closed with private investors owning the smallest-ever portion of the UK share equity portfolio on record, according to the latest Private Investor Watch from Capita Registrars, the UK’s largest administrator of company share registers.
Share sales combined with falling share prices mean that by December 15, they held £118 billion, just 9.6 percent of the UK market, the smallest ever share.
In value terms, UK private investors only owned less in 1981, 1979 and 1974, after adjusting for inflation. In 1981, Britain was in the grips of a deep recession as the Conservative government’s monetarist experiment tried to squeeze inflation out of the system. In 1979 Britain suffered the notorious Winter of Discontent, and in 1974, the Conservative three day week was followed by a Labour government trying to spend its way out of economic disaster and encouraging other countries to do the same, the group said.
By contrast, 1968 was the peak year ever for private investors. The value of their shares in today’s prices was £473 billion, four times as much as today, and their share of the stock market was 49 percent. 40 years on, the picture is very different.
Michael Kempe, Operations Director of Capita Registrars said: “Never in modern times has share owning been less fashionable. The combination of falling share prices and the long term trend by private investors to reduce their holdings has seen 2008 end on a whimper. 2009 could well see this trend reverse, at least in the short term. We are seeing signs private investors are prepared to dip into the market again. By the time the economic news hits rock bottom, share prices will already have started their upswing.”
According to the report, the grip of the bear market did not spur private investors to sell in large volume in 2008. Most of the preparation for this event took place in 2007. For 2008 as a whole, private shareholders traded a total of £7.2 billion, but only sold a net £42 million of their shares. This is a fraction of their 2007 activity, when they traded over £14 billion, reducing their portfolios by a net £4.9 billion, concentrating their sales on cyclically vulnerable financials and commodity stocks and their purchases on relatively more stable utilities and telecoms shares. 2008 saw this trend continue with healthcare also joining the buy list.
Notwithstanding the long term trend of selling direct equity holdings, private investors turned net buyers in October and November to the tune of £645 million, the first time they ventured back into the market since February. The FTSE All Share fell 14.1 percent in the period, but was extremely volatile, twice falling and then rising by almost 20 percent.
Kempe added: “Normally private investors shun volatile markets - they have been sitting on the sidelines for much of the past year. But it seems the lows of October and November proved irresistible to many and they dipped their toes back in, perhaps hoping to make some trading profits in time for Christmas. If you were clever and timed your buying and selling perfectly you could have made almost 50 percent returns in the last two months. 2009 should see market conditions improve, but it seems too early to call a bottom just yet– the recent upswings have all the characteristics of bear market rallies.”
Share sales combined with falling share prices mean that by December 15, they held £118 billion, just 9.6 percent of the UK market, the smallest ever share.
In value terms, UK private investors only owned less in 1981, 1979 and 1974, after adjusting for inflation. In 1981, Britain was in the grips of a deep recession as the Conservative government’s monetarist experiment tried to squeeze inflation out of the system. In 1979 Britain suffered the notorious Winter of Discontent, and in 1974, the Conservative three day week was followed by a Labour government trying to spend its way out of economic disaster and encouraging other countries to do the same, the group said.
By contrast, 1968 was the peak year ever for private investors. The value of their shares in today’s prices was £473 billion, four times as much as today, and their share of the stock market was 49 percent. 40 years on, the picture is very different.
Michael Kempe, Operations Director of Capita Registrars said: “Never in modern times has share owning been less fashionable. The combination of falling share prices and the long term trend by private investors to reduce their holdings has seen 2008 end on a whimper. 2009 could well see this trend reverse, at least in the short term. We are seeing signs private investors are prepared to dip into the market again. By the time the economic news hits rock bottom, share prices will already have started their upswing.”
According to the report, the grip of the bear market did not spur private investors to sell in large volume in 2008. Most of the preparation for this event took place in 2007. For 2008 as a whole, private shareholders traded a total of £7.2 billion, but only sold a net £42 million of their shares. This is a fraction of their 2007 activity, when they traded over £14 billion, reducing their portfolios by a net £4.9 billion, concentrating their sales on cyclically vulnerable financials and commodity stocks and their purchases on relatively more stable utilities and telecoms shares. 2008 saw this trend continue with healthcare also joining the buy list.
Notwithstanding the long term trend of selling direct equity holdings, private investors turned net buyers in October and November to the tune of £645 million, the first time they ventured back into the market since February. The FTSE All Share fell 14.1 percent in the period, but was extremely volatile, twice falling and then rising by almost 20 percent.
Kempe added: “Normally private investors shun volatile markets - they have been sitting on the sidelines for much of the past year. But it seems the lows of October and November proved irresistible to many and they dipped their toes back in, perhaps hoping to make some trading profits in time for Christmas. If you were clever and timed your buying and selling perfectly you could have made almost 50 percent returns in the last two months. 2009 should see market conditions improve, but it seems too early to call a bottom just yet– the recent upswings have all the characteristics of bear market rallies.”
