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.
Research by Capita Registrars, which looks after the share registers of 100 of the biggest 350 listed companies, suggests that small investors have sold a net £10 billion of shares since February. Sales by individuals outweighed new purchases by £3 billion in February and March, by £1 billion in April and May and by £6 billion in June and July.
The sell-off this year is now equivalent to 5 per cent of individual direct shareholdings and reduces the proportion of the entire market held directly by UK private investors from 12 per cent to 11 per cent.
John Roundhill, director of Capita, said that 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.
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The biggest exit was from the financial sector, with small investors selling a net £1.7 billion of bank and insurance shares. Next came consumer services, including retailers and pubs and restaurants, with a net £1.5 billion 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.
Mr 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.”
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Capita began to analyse private investor buying and selling patterns only this year, but Mr 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 1.6 million private investors, then scales up the results to represent the entire market. Private investors now own £192 billion- 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 2.6 million policyholders.