Large falls in the final hour of trading are becoming increasingly common as a result of fear in the global stockmarkets, a group of Birmingham brokers have said.
In the past weeks, a trend for sharp declines in the last 60 minutes of business has been noticed, and traders in the West Midlands believe that this is a response to ongoing anxiety about the state of the markets.
Jonathan Keeling, chief executive of Arden Partners, said that stockmarkets falling late in the day is due to brokers worrying about what will happen in the markets overnight.
“There have been real drops in the last hour of trading,” he confirmed. “You will have people who have perhaps tried to take a bull position at the beginning of the day, and if it’s not working they’re holding on and holding on, but they don’t want to risk exposure overnight and so they’re selling it.
“And the volatility is immense. The big problem ultimately is that you’re trying to get cash for assets – whether you’re a big hedge fund or someone trying to buy a house. Whilst you have got some companies trading relatively well, everything else is just getting hammered.
“If the markets keep continuing to go down, you keep getting larger falls and larger falls, and then obviously with the quick way markets have fallen and the percentages they have fallen, we have not seen people able to keep their positions. You have these huge sell offs involved.”
And the current economic climate is causing white-knuckle rides for many brokers. Although it was fairly standard practice for share prices to fall on a Friday afternoon, as brokers tried to shift their stock before the weekend break, the financial situation in recent weeks has caused this pattern to be repeated on a daily basis. Now the market has been falling in the last hour of trading on most days.
One Birmingham broker said that the much of the trend for a late plunge was down to anxiety about Wall Street, and wanting to secure their positions before dramatic events took place across the Atlantic.
“A weekend in this environment is a long time so obviously there is a lot of closing positions,” he said. “And now it does seem to be a daily occurrence – people are almost getting used to it.”