On Friday, UK brokers and traders saw one of the busiest trading days in recent history after the result of the EU referendum was announced. Several brokers, including some of the UK’s biggest online stockbrokers Hargreaves Lansdown and TD Direct, reported problems with their online trading platforms, as volumes surged and investors rushed to buy or sell equities following the vote. In the first few hours of trading, trading volumes were ten times more than normal levels, which really shows how spooked investors became.
According to the trading reports published by the UK’s largest retail brokers, the majority of the trading conducted during the early hours of Friday morning was buying. Specifically, it looks as if investors piled into banks, choosing to sell defensive investments to fund the purchases.
Buy banks
According to Barclays, 17.3% of the share purchases conducted on its retail share trading platform on Friday were for shares of Lloyds Banking group. 14% of the purchases on the platform were for shares in the Barclays group. Taylor Wimpey was the third most popular purchase among investors after the company’s shares fell by as much as 40% in early trade.
Hargreaves Lansdown is reporting similar trading figures. Lloyds, Barclays and Taylor were the third most popular purchases among investors on its platform last week.
Sell dividends
It looks as if investors have piled into the financial sector, seeking bargains after Friday’s declines. However, it also appears that to finance these purchases investors dumped defensive shares, which may prove to be a big mistake if there’s no forthcoming, clear-cut plan from the ‘leave’ campaign in the next few weeks.
According to data from Hargreaves Lansdown, GlaxoSmithKline, Aviva and Vodafone were three of the top ten sells by investors last week. Other names in the top ten sales list, are Glencore, Shell and BP, all of which are set to benefit from a weaker pound, and as the majority of their operations are outside the UK, are unlikely to be affected by a Brexit.
Similar trends are seen in Barclays’ retail trading figures. Perhaps even more surprisingly, the most sold stock on Friday was gold miner Centamin, a company that is only set to benefit from the market turbulence as gold prices push higher.
A huge mistake?
It could be the case that investors have made a huge mistake by selling defensive equities and buying into the banking sector on Friday. In times of uncertainty defensive equities often outperform, and there are very serious questions being asked about the future of the UK’s financial industry now lawmakers are considering Brexit.
UK banks have been able to dominate the European financial markets due to their ‘passporting’ rights for the rest of the continent, which allow them to sell their services across Europe. These rights could be under threat if the UK leaves the EU.
In uncertain times it’s always best to hunker down and be defensive, but it looks as if many investors adopted the opposite approach last Friday.