Stock markets outperform predictions, bullish on 2006

Stock markets outperform predictions, bullish on 2006

	Published : Sat, 31 Dec 2005 14:05 By : James Rowe Print this Story

LONDON: The British stock market performed far better in 2005 than predicted, with the FTSE100 having its best year in six recording a 16.7 per cent rise to reach 5,618.80. The All Share index too had risen 18.1 per cent to 2,847.02.

Stocks, for the first time since 1999, outperformed housing sector in terms of growth as bumper dividend payments and share buybacks brought unprecedented returns to investors. According to analysts, dividend payments had gone up 10 per cent compared with an expected rise of nearer to four per cent. They feel the trend will continue through 2006.

Many of them also predict further gains in 2006 for the FTSE100 Index to reach the 6200 mark.

The most notable achievement has been for the mining and resources stocks. The mining sector headed the board in sectoral performance rising 62.9 per cent. However, in spite of higher oil and gas prices, the oil and gas sector rose by only 25.7 per cent.

One factor that surprised many market watchers has been the performance of the midcap companies. The FTSE250 index outperformed the blue-chip index, recording a 26.8 per cent rise. An increasing M&A activity has helped this resurgence, many analysts feel, even though the mid-caps are more exposed to the sluggish U.K. economy.

M&A activity in fact was at its busiest best during the year. Several FTSE100 companies were involved -- Allied Domecq, BPB, O2 and P&O. One trend brought out in M&A activities is that it was not just private equity houses, which were active in the M&A domain, but even trade buyers, too came out. According to an estimate, private equity houses accounted for some 14 per cent of the total M&A, which is down from 21 per cent in 2004.

The best individual performer on the stock market was online auctioneer QXL Ricardo. It had a record performance -- an increase of 1,260 per cent, after it was in the dumps at 1 pound-a-share in 2003. Though it is less known in Britain, it had strong presence in countries like Switzerland, Norway and Denmark. Among the other best performers were housebuilder Persimmon (80 per cent) and oil and gas explorer Cairn Energy (75 per cent).

Support services group Jarvis turned out the worst performance, when its shares fell 89.9 per cent to reach 92 pence.

The year provided ample opportunities for the Alternative Investment Market. Nearly 523 new companies were listed on the exchange, 118 of them international.