Interactive Investor

The big fallers in the FTSE 250 sell-off

It’s been a tough few weeks for the FTSE 250, whereas the FTSE 100 index has held relatively firm. Our City writer examines the recent market sell-off.

25th October 2023 15:43

by Graeme Evans from interactive investor

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Assessing the sell-off 600

London’s blue-chip index continues to provide shelter after a market downturn that’s left the FTSE 250 11% weaker as the worst-performing of all major global indices.

The support of oil, mining and defensive stocks means the top flight has fallen by less than 4% since the selling started on 14 September, better than any other benchmark.

The two-speed performance of the London market continued today as Rio Tinto Registered Shares (LSE:RIO) and BAE Systems (LSE:BA.) kept the FTSE 100 in positive territory, whereas weaker TUI AG (LSE:TUI) and publisher Future (LSE:FUTR) contributed to a fresh one-year low for the FTSE 250.

The acceleration in mid-cap selling follows a run of profit warnings as the strain of higher financing costs and faltering demand conditions begins to be felt.

Downgrades in recent sessions have included National Express owner Mobico Group (LSE:MCG), building firm Vistry Group (LSE:VTY) and the fintech CAB Payments Holdings (LSE:CABP), whose alert was particularly stunning given that it only listed three months ago.

The money transfer business tops the list of this downturn’s biggest FTSE 250 fallers, with shares now 78% lower after further selling during this morning’s session. Mobico is down by a third and Vistry off by 28%, while Spirent Communications (LSE:SPT) and 888 Holdings (LSE:888) have dropped in the region of 35% following their recent updates.

The weakening of investor confidence has been seen in the performance of Aston Martin Lagonda (LSE:AML), whose shares raced to near 400p in late July but have since fallen 36% to 211p.

In total, 35 stocks in the FTSE 250 have registered losses of 20% or more since the surge in global bond yields and the Israel-Hamas war triggered a flight from risk.

They include 11 stocks with current market valuations above £1 billion, including Upper Crust caterer SSP Group (LSE:SSPG), bootmaker Dr. Martens Ordinary Shares (LSE:DOCS) and the low-cost airline Wizz Air Holdings (LSE:WIZZ).

Among the 17 stocks in positive territory over the period, Moneysupermarket.com Group (LSE:MONY) and Plus500 Ltd (LSE:PLUS) have offered investors protection after their robust trading updates. Ground engineer Keller Group (LSE:KLR) upgraded profits guidance on Monday, meaning shares are unchanged since the downturn started in mid-September. 

The current mid-cap valuations strengthen the hand of private equity bidders, particularly as boards are more likely to opt for the certainty of a deal at a time of higher finance costs.

In the FTSE 100, the recent outperformance over the S&P 500 and other global benchmarks reverses the trends seen earlier in the year. That’s because those companies that have most of their cash flows happening in the short term, pay dividends or have relatively slower growth outlooks tend to perform better when bond yields rise.

In contrast, the tech and growth companies that were behind big gains on Wall Street earlier this year are more sensitive to valuation changes caused by bond yield moves.

UBS strategist Caroline Simmons said: “The UK is considered a value market. It has little tech exposure and is mostly made up of traditional sectors like financials, energy, and mining.

“Hence, as bond yields rose in recent months, the UK equity market sold off less than other markets. The UK’s heavy exposure to energy (15% by market cap) has also led to the UK outperforming other regions amid the Israel-Hamas war.”

With no end in sight to the conflict, UBS warns oil prices are likely to stay elevated and could even reach $120 a barrel in certain risk-case scenarios.

Simmons added: “The impact of geopolitical events on global financial markets is often much more short-lived than investors think. Meanwhile, UK (and global) stocks should advance as US bond yields stabilise - as one would expect given falling growth and inflation.”

£1billion-plus FTSE 250 companies down 20% or more in past six weeks

Name

Sector

Price

Market cap (m)

Share price since 14 Sep (%)

Share price in 2023 (%)

Current dividend yield (%)

Aston Martin Lagonda Global Holdings

Automobiles and Parts

213.2p

£1,696

-35.8

38.4

Energean (LSE:ENOG)

Oil, Gas and Coal

813.75p

£1,457

-30.7

-37.8

8.9

Vistry Group PLC

Household Goods and Home Construction

680.5p

£2,353

-28.1

8.8

7.9

Playtech (LSE:PTEC)

Travel and Leisure

368.2p

£1,139

-27.8

-27.7

IWG (LSE:IWG)

Industrial Support Services

126.55p

£1,274

-26.2

-23.8

Carnival (LSE:CCL)

Travel and Leisure

839.2p

£1,284

-25.6

44.8

Dr. Martens

Personal Goods

115.35p

£1,131

-25.1

-39.5

4.9

Oxford Instruments (LSE:OXIG)

Electronic and Electrical Equipment

1769p

£1,023

-23.8

-21.7

1.1

Drax Group (LSE:DRX)

Electricity

433.2p

£1,666

-21.8

-38.4

4.7

Safestore (LSE:SAFE)

Real Estate Investment Trusts

648.5p

£1,414

-21.4

-31.4

4.5

Pets at Home Group (LSE:PETS)

Retailers

280.3p

£1,335

-21.5

-1.2

4.4

Wizz Air

Travel and Leisure

1616.75p

£1,671

-21.3

-15.1

Renishaw (LSE:RSW)

Electronic and Electrical Equipment

3028p

£2,204

-20.3

-17.4

2.5

Source: SharePad as at 25 October 2023.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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