Monthly Market Report - October 2015

30th September 2015

With commentary from David Stevenson

That was fun wasn't it! August is supposed to be a sleepy month, with most investors away, leaving juniors to man the workstations and trading desks. But the last few weeks have proved to be mightily turbulent, prompted by fears that China is about to experience that mythical 'hard landing'. Yet from my own personal perspective I'm not quite sure what we learnt that was new over the summer. Global growth is still patchy, the US is still in fairly good shape and the Eurozone is still slowly, painfully making its way out of a sharp slowdown. We also learnt that Chinese equities were volatile - quelle surprise - and that the Chinese authorities are not omnipotent. Quite why anyone was surprised by this discovery is frankly laughable. China is still trying to execute the financial equivalent of a sudden sharp turn off to the exit whilst motoring in the middle lane driving along at 50mph! Itís attempting a restructuring and a balance sheet makeover at the same time, whilst also manfully struggling with booming property markets and declining competitiveness for many of its key industries. Mistakes were inevitable and the fact that many growth orientated stocks on its local stock markets were valued at hundreds of times earnings, propelled along by generous debt for margins positions, was an open invitation for a meltdown.

But I ask again - what's new? What new pieces of information did we observe that reinforce the bearish view that the global economy is perched on the edge of a recession? I'd argue that we haven't in fact learnt much and that equity markets are now a great deal cheaper than they were at the beginning of the summer. That suggests that once investors stop worrying about China/Greece/rising US rates, they'll realise that some equities in some markets are beginning to look attractive again.

One other story caught my eye as well, namely the good old British private investor. The good news is that private investors are still putting money to work, investing for the future, or at least that's what the most recent report by the government's ONS suggests. Apparently 9.5% of FTSE 100 shares are now held by individuals, but the most surprising revelation is that private investors own 30.6% of shares in AIM listed companies! As these numbers were released by the government agency, UK broker The Share Centre chimed in with its own research that revealed that 20% of its ISA account holders invested in the AIM market - a really rather big number when you consider that until fairly recently AIM stocks couldn't be included in an ISA. Even more revealingly The Share Centre revealed its top ten most traded AIM stocks in August. Feast your eyes upon this long list of circus freaks, penny stock wonders and occasional quality stock:
  1. African Potash
  2. Jubilee Platinum
  3. Rare Earth Minerals
  4. Marechale
  5. Share Plc
  6. Quindell
  7. Optimal Payments
  8. UK Oil & Gas
  9. Telford Homes
  10. Utility Wise
Download the full Monthly Market Report here.

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