Friday, August 09 14:45:51
London's beleaguered junior stock market is on track for its best weekly volumes in two months, fuelled by rule changes that prompted investors to snap up stocks, particularly in the beaten-down basic resources sector.
The lurch higher in volumes on AIM, a sub-market of the London Stock Exchange, followed implementation on Monday of a government plan to let people invest in small firms while avoiding tax to help drive economic recovery.
The UK's move to allow individual savings accounts (ISAs) - popular products allowing limited tax-free saving - to hold AIM stocks has seen volumes over the past four days rise to some 35 percent above the average since the beginning of June.
Despite the seasonal quiet period, trading volumes are up 11 percent on the year-to-date average and analysts expect them to rise further.
"It went absolutely mental on Monday and it's still pretty strong," Mike McCudden, head of derivatives at Interactive Investor, said, adding that on the first day of trading under the new rules his clients made 300 percent more trades in AIM compared with the prior four Mondays' average.
"We expect volumes to taper off from initial highs as clients reach their ISA limits and the initial excitement settles down, however, going forwards we expect steady fresh inflows of investment into this market."
Many AIM stocks are small, risky early-stage resources companies, which often need repeated capital injections. This weighting saw the AIM index significantly underperform the blue-chip FTSE 100 over the past two years.
Such firms do, however, have the potential for big gains, for example if they find metal or strike oil and with investor appetite for them revived by signs of economic improvement.
The FTSE AIM index has this week risen about 1.8 percent, outperforming the blue-chip FTSE 100, around 1.5 percent lower.
Ncondezi Coal, Maple Energy and hazardous waste specialist Augean are among stocks that have seen average daily volumes double compared to the past month.
McCudden at Interactive Investor said his clients had bought heavily into potash explorer Sirius Minerals, seeing good value in the shares which recently fell sharply on concerns over the outlook for the potash market.
Oil explorer Gulf Keystone Petroleum, which is focused on oil fields in the Kurdistan region of Iraq, has also proved popular, he said.
The pair were among the AIM shares most purchased this week by clients of Hargreaves Lansdown, whose data runs to Thursday's close. Others on the list included Berkeley Mineral Resources and oil and gas group Bowleven. (Reuters)