FE Trustnet assesses the performance of the FTSE All Share industries amid a turbulent year for investors in the UK stockmarket

 

According to data from FE Trustnet, only one of the UK’s 10 main industries have posted positive stock market returns in 2018 so far, highlighting the challenges facing equity investors as market volatility returns.

The past year has proven to be a challenging one for investors, with stock markets around the world selling off in recent months on the back the US-China trade war, the Federal Reserve’s rate-hiking programme, signs of lacklustre economic growth and other concerns.

‘stock markets around the world selling off in recent months on the back the US-China trade war’

When it comes to the UK, the added complication of Brexit and the uncertainties attached to it means that the country has underperformed its global peers.

FE Trustnet data shows the MSCI AC World – a broad measure of the global stock market – rose 1.44 per cent in the first 11 months of 2018 while the UK’s FTSE All Share was hit with a 9.44 per cent loss.

Drilling down into the 10 industries that go into the FTSE All Share index shows that nine of them made a loss between January and the end of November 2018: only healthcare stocks in positive territory.

 

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Healthcare companies tend to be popular with investors seeking reliable income streamers and are often seen as more defensive holdings thanks to the fact their goods are in demand no matter the economic climate, suggesting why they have been attractive in 2018’s difficult conditions.

The best-performing healthcare stock of 2018 has been Oxford Biomedica, which was up 59.71 per cent by the end of November.

The firm, which is a biopharmaceutical company specialising in the development and commercialisation of gene-based medicines, was up close to 140 per cent by mid-June after it signed a $842.5m licensing agreement with Axovant Science, although it has fallen back somewhat since.

However, there are other factors behind the sector’s strong performance in 2018 other than its defensive characteristics and individual success stories.

This is illustrated by BTG, which makes both radiotherapy treatments and snake venom antidotes. The stock is up 9.51 per cent over the period in question but jumped more than 30 per cent at the end of November after it was announced that it was being bought by Boston Scientific.

According to broker Panmure Gordon, this is eighth firm in the sector to be acquired over the past 18 months as international buyers have been drawn in by the cheapness of UK pharma businesses. This has boosted the stock market performance of the sector in the short term.

‘international buyers have been drawn in by the cheapness of UK pharma businesses’

Takeda Pharmaceutical’s acquisition of attention deficit hyperactivity disorder drug-maker Shire is one high-profile example undergoing completion at the moment.

However, 2018 has also seen Biotech Abzena bought by private equity firm Welsh Carson Anderson & Stowe, child specialist education and mental health firm Cambian Group by CareTech Holdings, anti-ageing cosmetic treatment firm Sinclair Pharma by Huadong Medicine and molecular research and drug discovery firm Vernalis bought by Ligand Pharmaceuticals.

At the opposite end of the performance spectrum is the technology sector; FE Trustnet data shows the FTSE All Share Technology index dropped 21.65 per cent during the first 11 months of the year.

This should come as little surprise as tech stocks have borne the brunt of ‘Red October’s’ heavy market sell-off.

Valuations in the space had reached expensive levels – especially in the so-called US FAANG stocks of Facebook, Apple, Amazon, Netflix and Alphabet subsidiary Google – and were hit hard when investor sentiment soured.

 





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