Investment platforms in the UK say they have experienced some of their busiest ever trading days this week as private investors reposition their portfolios amid volatility on global markets.
The continued spread of the coronavirus prompted stock market drops around the world this week. Trading data show some private investors in the UK have been retreating from equities into the safety of cash and gold, but others have been actively “buying the dip” as share prices slide.
Interactive Investor, the UK’s second biggest investment platform, said that Monday — when the FTSE 100 index closed down 3.5 per cent — had been one of its busiest ever trading days.
At the start of the week, nervous investors were cashing out, but as the market falls continued, more have been bold enough to buy in — with most using index funds to buy the whole market.
When markets closed on Friday, the FTSE 100 was down 11 per cent from the start of this week. In the US, the S&P 500 index fell 4.4 per cent on Thursday, its biggest one-day decline since 2011.
Richard Hunter, head of markets at Interactive Investor, said: “Other customers took a broader view on Tuesday and decided to buy the market, with the FTSE 100 ETF [exchange traded fund] having a strong showing for buyers.”
Increased demand for UK and US ETFs was also recorded on other investment platforms. According to AJ Bell, the iShares Core FTSE 100 ETF was the number one most bought fund in the past week, followed by Vanguard’s FTSE 100 ETF fund, above the S&P 500.
Half of the most purchased ETFs on AJ Bell were FTSE 100. On Thursday, iShares FTSE 100 was the third most popular share, with 83 per cent of investors buying, according to Interactive Investor.
But the data also indicated a retreat into gold and cash. Two of the most purchased ETFs on AJ Bell focused on gold and precious metals. Interactive Investor said that cash held on the platform had increased overall by 1 per cent this week, as cautious investors moved their money out of equities.
At an individual stock level, investors were speculatively buying companies directly affected by the spread of the virus.
Data from the investment platforms show that one of the most traded shares this week has been the French biomedical company, Novacyt, which produces a test for coronavirus. Shares in the company are up 909 per cent since the start of the year.
According to data from Interactive, Novacyt was the second most popular share on the platform after Lloyds. On Monday, 67 per cent of transactions for Novacyt were buys, while on Tuesday that number fell to 56 per cent. The share is the seventh most popular purchase on AJ Bell.
“Novacyt has become the trader’s way to play the coronavirus,” said Interactive Investor.
Laura Suter, a personal finance analyst at AJ Bell, cautioned that while Novacyt could be a smart play for investors, the company had been tight-lipped about what demand for the coronavirus test could mean for its profits and revenue.
“The share price chart has some pretty alarming peaks and troughs so far this year, so it’s certainly not one for the faint-hearted,” she added.
EasyJet, the second worst performing stock on the FTSE 350 this week, was in the top 10 most traded stocks on Hargreaves Lansdown, Interactive Investor and AJ Bell.
Mr Hunter said: “EasyJet, another stock panned by the general markdown in tourism shares, also attracted strong buying interest, as did the oil majors, given the dip in the oil price on the back of perceived demand destruction in China.”
Hargreaves Lansdown also noted a pronounced increase in trading activity as investors looked to profit from volatility. The top traded shares on the UK’s largest investment platform showed a spike in investor interest in gold as the iShares Physical Metals Physical Gold ETC was the third most traded share on Hargreaves at the start of the week.
The most popular funds among investors on the platform included Baillie Gifford Managed, Baillie Gifford Positive Change, and BlackRock Gold and General.
Experts pointed to the fact that trading activity had not lifted the market overall as evidence that most institutional and private investors were not looking to pick up shares — at least, not yet.
Seema Shaw, chief strategist at Principal Global Investors, said: “The fact that this reaction has not materialised suggests that caution and fear is reigning strong and, with the negative turn in coronavirus news flow outside of China potentially in its early stages, further drops in risk assets cannot be ruled out.”
Advisers warned against panic selling. Jason Hollands, managing director of Tilney Investment Management, said: “Now is the time for investors to exercise nerves of steel and to avoid the temptation to knee jerk sell long-term investments in reaction to short term turmoil. In so doing they will just crystallise losses.”
Lord Lee, a private investor who has written about his Isa portfolio in the pages of FT Money for many years, urged investors to stay the course.
“I have been through this type of severe correction several times in my years as a private investor,” he said. “The important thing is not to panic — taking the longer view, these present excellent buying opportunities.
“In the 2008 financial crisis I bought a number of shares on double figure yields which delivered great appreciation when markets recovered. The problem is no bell rings at the bottom — nor at the top for that matter.”