Fund bosses shrug off the correction
FUND managers yesterday said that UK markets were facing a correction but that the FTSE 100 would not fall below the 3,500 level as it did in March.
They said they were not preparing for a severe correction, after the UK’s blue chip index closed at 4,230 points yesterday, a 6.1 per cent fall on the highs of over 4,500 seen at the start of the month.
And they added they remained bullish on the prospects for a sustained recovery, arguing that further confirmation of recent good news would see markets resume their rallies.
Rod Barker, of Stanley Fink’s hedge fund group ISAM, said: “In my opinion we have turned a corner.”
He said the summer would be punctuated by some strategists predicting sharp falls in the market, but that any decline would be explained by profit taking – not a collapse in investor sentiment.
Hedge fund heavyweight Jonathan Hughes-Morgan, co-founder of asset manager Occam, said he is “definitely more positive” than he was during the March lows.
“There has been no negative news, but yet markets have sold off. That tells me people are telling themselves ‘well, we’ve got a bit of profit so we will just take it off the table’,” he said.
In a sign of his bullish stance, he added that the group’s funds currently do not have a net “short” position on UK equities.
And respected BlackRock small- and mid-cap fund manager Richard Plackett said investors should look on the bright side despite recent market falls. “The recent round of rights issues has inevitably caused some indigestion,” he added.
Brewin Dolphin chief strategist Mike Lenhoff said he would be surprised if the market falls back under 4,000 points.
“The market is searching for some kind of confirmation of the underlying economic recovery it has been expecting,” he added.
But Motley Fool analyst David Kuo said the FTSE 100 is likely to fall back under the 4,000 level, amid a correction of up to 15 per cent from this month’s highs.
“The markets are probably well ahead of themselves, in terms of the current price-to-earnings ratios we are seeing, so it is difficult for them to go forward from here,” he added.
The FTSE 100 fell to lows of 3,521 points in early March, before staging a 27.8 per cent recovery over the last three months.