Midland investors are standing firm by their stock market investments despite a new survey claiming to show many are turning their back on the FTSE.

On a day when the FTSE 100 Index slumped more than two per cent, a survey from Lloyds TSB suggested 40 per cent of West Midland investors had moved some of their money into safer investments, such as cash or bonds, in the past six months.

But investment advisers in the Midlands said their experience was that clients were keeping their nerve amid a contracting market and had their sights fixed on the long term.

According to the survey, 60 per cent of Midland investors feel apprehensive about stock market investments in the coming 12 months - slightly higher than the national total of 53 per cent.

The online survey - which quizzed 804 stock market investors in July - also found the average amount invested in equities is down from £29,000 in December 2007 to £16,000 in July 2008.

But investors in the region are less likely to be swayed by reporting of the credit crunch - 42 per cent of West Midland stock market investors modified their investments because of news reports, compared with 48 per cent nationwide.

According to the poll, just six per cent of Midland investors have put more money into equities in the hope the markets will rally, compared to nine per cent of the national total.

But Joanna Thornell, Midland managing partner for Coutts, said among her clients long term investors in equities were remaining cool-headed.
“Whereas we have not seen this precise combination of circumstances before, we have had oil shocks and credit crises before, and these have blown over,” she said.

“Among our clients, if people’s original objective was long term, they are staying there.”

Ms Thornell said although clients were becoming more cautious and some had been “tweaking” their investment portfolio in the face of stock market turmoil, they had not been making wholesale changes or deserting equities altogether.

“Although we do think that equities are still volatile, they are still a good opportunity for the long-term investor.”

Ms Thornell pointed to increased interest in capital-protected investments, where capital is guaranteed as long as investors hold it for a certain time.

Returns are linked to the performance of an asset class such as equities, bonds or commodities.

Pound averaging - investing a lump sum in regular instalments spread over a period of time - is also increasing as investors seek to protect themselves against further stock market declines, said Ms Thornell.

Stephen Jones, divisional director and head of the Birmingham office of stock broker Brewin Dolphin, also said he had seen no evidence of a drop in confidence in equity investments among his clients.

“Having said that, we are seeing significantly more demand for alternative asset classes such as hedge funds, structured products and infrastructure funds and new money is going towards that.

“Alternative asset classes offer an element of predictability that the stock market cannot give and, as we know, the stock market has been quite volatile.”

London’s blue chip share index slumped nearly 2.5 per cent yesterday as fresh fears over the economy caused misery for the banking and retail sectors.

Investors were rattled amid a warning from a former top IMF economist that a US bank was likely to collapse in the next few months, and reports of a potential bail-out for US mortgage lenders Fannie Mae and Freddie Mac.

Speculation that US investment bank Lehman Brothers could disappoint with weaker-than-expected third-quarter results also added to the pressure on financial stocks.

London’s FTSE 100 Index was down 129.8 points to 5320.4, or 2.4 per cent, thanks to the market jitters.

anna.blackaby@birminghampost.net