SO, FAREWELL soon, 2003. And a fond farewell it will be, too. After three years of misery for equity investors, the 15 per cent rebound in the UK stock market this year has been especially sweet, andthe performance tables of 2002 have been turned almost on their head.
How many people guessed that the over-expanded telecoms group Cable & Wireless, which was last year’s most disappointing blue chip and had been all but written off as a basket case, would emerge as the FTSE 100’s star?
It would have taken a brave punter to suggest the best performing sector of 2003 would turn out to be IT hardware, which includes equipment makers such as Marconi and the microchip designer ARM Holdings, and which had been the smelliest dog of 2002. The software sector, which lost 60 per cent of its value last year, rebounded strongly, too.
And who would have thought the FTSE All-Share’s winner would be Photo- Me International, which had provoked hilarity and mistrust in equal measure during the bear market by paying for acquisitions in old photo booths?
But that is what 2003 has been all about: the rediscovery of the appetite for risk. Trafficmaster emerged as the best performing fully listed share, despite being excluded from the FTSE All-Share, disbarring many fund managers from holding the stock. The company has been propelled into pole position only in the past month, thanks to contracts to put its vehicle tracking systems into Mazda, MG Rover and Nissan cars.
As in many years, punters needed to fish in the more dangerous waters of AIM to get the best bargains and there turned out to have been more than 100 stocks in that market where you could have doubled your money. Best of all was Caledon Resources, symbol of the stock market’s dawning realisation of the economic might of China, whose shares rose from 0.96p at the start of the year to 12.25p last Friday – a return of 880 per cent. Caledon explores for gold in China and other regions of Asia. Other gold miners also benefited from the soaring price of the precious metal, including the 2003 runner up, Oxus Gold, which is showing a return of 806 per cent.
Plenty of opportunity to lose one’s shirt, too, of course. Dozens of little stocks have been delisted or suspended with very little hope of return. Of those that have struggled to survive the whole year, the biotech group Xenova comes out bottom on the main market, thanks to the collapse of trials of its most exciting cancer drug. On AIM, the wooden spoon goes to Inter-Alliance, a chain of financial advisers which has needed to be bailed out with extra funds from shareholders. Its shares have lost 98 per cent of their value.
For destruction of value on a grander scale, you need only look a few places further up the league table to find Invensys, the sometime FTSE 100 engineering giant, which has seen pounds 1.25bn wiped off its market capitalisation. Poor trading has continued and the group has now admitted that if the proceeds of its massive disposal programme fall short of expectations, then the group may run out of money. The heavy weighting of Invensys explains why the electronics sector is the worst performer this year.
Like many equity markets in the West, the UK’s went to the edge of the abyss and back. By the nadir of 12 March, the FTSE All-Share was down 16 per cent as the threat of deflation frightened professional fund managers and day-trading taxi drivers alike into the safe haven of bonds. The bear market, which began with the new Millennium, cut share prices in half, and the spring-back since spring has recovered only a fraction of the ground.
Yet there are big stocks ending the year having touched record highs, and it is perhaps with an optimistic tour of these we ought to sign off. The ascent of Man Group has continued, as punters piled into the asset manager’s latest hedge funds. The year’s colourful performance by Carnival, the cruise ships group, reflects the nascent recovery in international tourism. And there have been big purchases of Next shares, up by almost 50 per cent, as it gets its retail offering right.
Even mmO2, the mobile phone group spun out of BT in 2001, is only 16p away from its early high of 93p.
