Returns were in the negative column across the board, FTSE said and there was no mystery about the causes:
- the effects of the looming Iraq war on corporate spending and investor confidence
- continuing Middle East unrest
- political unrest in Venezuela that was keeping oil costs at more than $30 a barrel.
The UK made a rare appearance in the ranks of the worst performers, as investors worried that the prolonged bear market would weaken the position of the insurance sector. Bank shares were also affected by fears that the house price bubble would burst, causing a surge in bad debts, FTSE analysts said. The other worst performers included Venezuela, Indonesia, Finland and Pakistan.
There was a strong Chinese theme to the list of best performing countries, with Taiwan joining China’s domestic and foreign markets in the top five. The Chinese economy is an island of growth in a sluggish world. The Chinese bourses’ performance was topped, however, by Argentina after the International Monetary Fund agreed an aid package to avoid a debt default. Other best performers included Thailand.
Utilities Sector Does Well in Bear Market
Unsurprisingly for a bear market, the best performing sector (and the only to rise over the month – a 2.1% gain), was the new FTSE sector of Utilities, Other, which contains the sub sectors Gas Distribution, Water and Multi-Utilities. Conversely, second best performer was a surprise, with Information Technology taking modest heart from the latest trading updates to the sector. Health, Media & Photography, and Specialty & Other Finance founded out the top five.
In another reversal of fortune, tobacco was the biggest casualty, with investors afraid that consumer spending will slow this year in the face of war uncertainty, and high debt levels. Rounding out the bottom five sectors were Support Services, Insurance, General Retailers, and Beverages.
At the individual stock level, January’s best performer was Elan, the Irish pharmaceuticals group, which was able to sell off its primary care business, establishing its financial position. Alcatel, the French telecom equipment group, rallied on the back of better-than-expected results while Safeway, the UK supermarket group, was the subject of a bidding war with six potential predators.
The individual stock casualties of the month included Pan Fish, the Norwegian fish farming group which arranged a debt-for-equity swap to bolster its financial position and NEG Micon, a Danish windmill maker, which reported weaker-than-expected results.