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Private investors offload GBP9.1bn of equities

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Private investors sold equities faster this autumn than any time since at least 2006 according to the latest Private Investor Watch from Capita Asset Services, which tracks the trading activity of 1.6 million private shareholders.

Between September and November, they sold down GBP9.1bn of shares, easily the largest period of selling in the nine year history of the research. By the end of November, their total holdings had fallen to GBP224.2bn, GBP17.7bn lower than in the summer, when they reached their highest level since 2007. The decline is a combination of lower share prices and sales of shares. The sudden flight from shares reversed in three months more than two years of steady additions to equity holdings, bar a brief period of minor selling a year ago.

By the end of 2014, holdings had fallen further to GBP220.4bn.

No sectors escaped the sell-down, the first time there has been indiscriminate selling since late 2011, only this time on a much bigger scale. Investors shed a net GBP2.5bn of financial stocks, GBP2.0bn of consumer goods shares and GBP1.6bn of resources. Barring the tiny IT sector, healthcare was the least scathed, with just GBP442m of sales.

The flight to the relative safety of cash left the UK’s private investors owning 11.0% of the UK market, down from 11.5% in the summer, and the smallest share in a year. Nevertheless, private investors are still the largest holders of UK shares after foreign investors, and remain far ahead of UK institutions.

Trading volumes were very high, considering that private investors typically buy and hold shares for a long time, on average for five years, far longer than the average two year holding period of an institutional investor. Retail shareholders turned over stocks worth GBP34.2bn between September and November, the largest value since at early 2011.

Justin Cooper, chief executive of Shareholder solutions at Capita Asset Services says: “The wave of pessimism that swept around the world in the autumn caused convulsions in global financial markets. Private investors took fright on a scale far beyond that which greeted the Lehman’s crisis and subsequent global depression. Once bitten in that collapse, it seems they were twice shy at the rumour of another. They may well have panicked unnecessarily. Markets have recovered their poise somewhat and made up much of the lost ground, so those who sold out at the low point in mid October may be regretting their decision.

“There is no doubt that sentiment is fragile and the economic news outside the UK is poor, but with returns on other investments so low, especially for income investors, it is hard to see what the alternative is to holding equities. This year we expect UK companies to pay a record GBP11.3bn in dividends to small investors.”

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