Bargain Hunter: market turmoil has opened up buying opportunities

The sharp market falls have resulted in a number of highly regarded investment trusts trading on unusually wide discounts.

Global stock markets are in a state of flux, with the spread of the coronavirus negatively impacting investor sentiment.

Last week global stock markets recorded their worst week since the 2008 global financial crisis; although markets have put in a better showing over the past couple of days, volatility remains at elevated levels. 

While an even bigger and more pronounced sell-off could be around the corner, the fall in share prices has opened up a number of buying opportunities.

- Why did US markets fall after interest rate cut? 

As a result, many fund managers will be taking a close look at their current portfolios and topping up holdings that they feel have been indiscriminately sold off by the market, as well as introducing new positions.

Investment trust investors can similarly take advantage of market volatility, as this has resulted in investment trust discounts widening.

One well-regraded trust on an unusually wide discount is Witan. The trust, which adopts a multi-manager approach and is also conservatively managed, is trading on a discount of 6.5%. Its 12-month average discount figure is 3.4%.

Other investment trusts that usually command a premium price but are now trading on small discounts include: Fidelity Asian Values (-3.2%) Finsbury Growth & Income (-1.8%), and Henderson Far East Income (-0.9%)

The widening of discounts has been widespread, with figures from the Association of Investment Companies showing that since the beginning of the year the discount of the average investment company excluding VCTs has widened by 5.6 percentage points, moving from -3.8% at the end of December to -9.3% at the end of February.

On a sector level the biggest discount moves have been in the following three sectors: Commodities & Natural Resources, Private Equity, and Country Specialist: Asia Pacific ex Japan.