Private shareholdings have reached a post-financial crisis high of £237bn following the most sustained period of net buying since the research began over five years ago, and as investors regain appetite for risk.
The end of May figure was the highest total since November 2007.
Investors have pumped £798m into equities in the last three months, trading £1.4bn of their shares. It represents the longest sustained period of net buying, a total of four consecutive quarters, adding £2.3bn to holdings. Cyclical stocks are firmly in fashion as private investors regain their appetite for risk.
The findings come from analysis of UK share registers from Capita Registrars. The increase reflects the longest unbroken period of net buying of equities since Capita began the research in 2006, coupled with a becalmed stock market in recent months.
Private shareholders added a net £798m to their direct holdings of shares between March and May, making the fourth successive quarter of net buying. This was the largest net purchase in two years and took the total net new money invested over the last year to £2.25bn.
By the end of May, private investor shareholdings were 11.7 per cent of the UK market, far ahead of the all time low of 10.9 per cent reached exactly a year ago.
Charles Cryer, chief executive of Capita Registrars said: “50 years ago, private shareholders owned more than half of the UK’s listed companies. Those days are long gone as pension funds, insurance companies and foreign investors now dominate the market.
“Nevertheless, equity ownership is not dying out. Private investors have recognised equities offer protection against inflation, the prospect of growth, and a superior income to many other assets.
“It’s no wonder they have been pouring their savings into shares. Since interest rates were slashed to 0.5 per cent just over two years ago, net investment in equities has been £2.7bn.”
Investors again opted for cyclical sectors in the last three months, spurred by an appetite to benefit from potentially higher returns, and to rebalance a heavy reliance on defensive sectors over recent years. Overall, they bought £905m of cyclicals. The biggest purchases were in commodities, no doubt spurred by the Glencore publicity, in financials and in consumer services. They sold £106m in defensives, with utilities seeing the biggest reductions.
Private investors have traded riskier equities over the last two and a half years. The first wave of buying accelerated as the market weakened sharply to its May 2009 nadir. This was followed by five quarters of selling into strength. Until February investors slowly started to buy cyclical shares again, but only cautiously, and continued to favour defensives. In the latest quarter the prospect of a gradually brightening economic outlook has encouraged them once again to switch back to cyclical shares and modestly reduce defensive stocks.
In total, private investors traded £1.4bn between March and May, the busiest two-way trading period since last summer.
Charles Cryer concluded: “The latest quarter has shown a big shift in risk appetite. This is only the second time in three years private investors have sold defensive shares. The shift is quite a brave step to take, but private investors have shown they trade astutely on the whole. With such sustained buying from private investors, corporate advisors may be encouraged to progress with sensibly priced IPOs that tap into this strong retail demand.”
• Photograph shows: Charles Cryer, chief executive of Capita Registrars