Bargain-seeking small investors were out in force on Monday as the fallout from Brexit sent many popular shares tumbling for a second day – attracted by price drops last seen following the credit crisis in 2008.
In the three days before last week’s referendum, small investors were preloading their trading accounts with cash at twice normal levels, say brokers. That money, they said, has since been invested in banks and housebuilders’ shares – sectors that have seen the biggest post-Brexit price falls.
Russ Mould, investment director at broker AJ Bell, said many small investors were “embracing volatility rather than running away from it”.
Last Thursday, Lloyds Bank stock was trading at over 70p while Barclays shares were 185p. Following a strong run, easyJet shares cost £15.20.
By Monday lunchtime, Lloyds had fallen to 51p – a 28% fall from last week. Barclays was down to 125p, while easyJet has fallen by more than a third. Housebuilders’ shares have also fallen heavily since Thursday: Barratt Developments is down from about 570p before the referendum vote to 352p by Monday lunchtime.
Mould said: “Trading volumes have been very high and generally customers have been looking to buy rather than sell, with three-quarters of deals struck on Friday and two-thirds so far on Monday being purchases.
“The most actively dealt stocks include the hard-hit banks and housebuilders, while on the funds side we are seeing active buying of exchange-traded funds which follow the FTSE 100 and the FTSE 250.” Lloyds and Barclays were the most traded bank shares, closely followed by the builders Taylor Wimpey and Persimmon. Insurers Aviva and Legal & General were also popular among small investors, he said.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said Monday’s trading followed a busy day on Friday for small investors when buying investors had outnumbered small sellers “four to one”.
“A lot of private investors have got their bargain-hunting spectacles on, and are trying to use the market turmoil to pick up some cheap shares,” he said. “It’s perfectly rational to buy into the market when it’s tumbled, as long as you recognise you’re unlikely to time the bottom and may have to stomach fresh falls.”
EasyJet, which issued a profit warning in the morning, was similarly being snapped up by investors on Monday, he said.
It’s not just shares that have been traded heavily. Gold, the traditional safe haven at times of uncertainty, has risen to a three-year high on the back of the referendum.
Paul Tustain, the founder and chief executive of the online gold trading firm BullionVault, said new account openings had been 10 times normal levels since the vote plunged the markets into turmoil. “Customers traded over £10m by 6.30am on Friday, going on to set a one-day bullion record of £30m by midnight,” he said. “On Saturday they executed 638 trades, and on Sunday another 2,128.”
