02 January 2009 - Annus horribilis, UK Stock Market
The index of the top 250 UK shares after the top 100 (see UK Stock Market History on this website), often referred to as second-liners and which are the most representative of the nation as a whole, fell 40.3% during 2008. That was its worst year on record. For investors and savers alike it was an annus horribilis. Part of the explanation for this bigger fall than the big-boys index (down 31% by the end of the last trading day) is that the FTSE 250 has 45% of its constituents in the industrial, consumer services and retail shares. This is a much bigger proportion than in the top companies and serves to show just how far the credit crisis moved from its roots in the investment banking arena. The biggest losers by industrial category were builders and related suppliers, tenanted pub owners and retailers. If there are any smiles around they belong to the insurers, insurance brokers and underwriters and to a lesser extend the utility companies and transportation businesses. One really alarming factor is how the consequences of the credit crunch crisis caught the most seasoned observers on the hop. This diary has yet to find a single commentator or economist who predicted this time last year what was about to happen. Compounding this surprise element is the fact that merger and acquisition activity dried up and it is this business that fuels much of the city professionals’ workload.
Returning to the international scene, Belarus has become the sixth country to be rescued by the IMF. It secured a loan of $2.5bn. Russia has pledged a further $2bn. The fundamental cause has been a run on its foreign reserves. The two keys exports of Belarus are potash fertiliser and oil products both of which have suffered from the severe fall in commodity prices (oil has fallen to $40 a barrel - see earlier entries in this diary discussing how such a low price is likely to stifle investment in new drillings)
Is there anyone out there predicting the 2009 investment scene?
No comments:
Post a Comment