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Northern grit

Last week was busy on a variety of fronts. Cofunds held its quarterly Platform conference in Harrogate, which, regrettably, I was unable to attend on this occasion. The reason was that I found myself further north, in Dunblane, addressing more than 200 private investors at the Association of Investment Companies’ Scottish Roadshow.

Given the bad news that investors have had to contend with recently, the tone was remarkably upbeat.

These gatherings around the country are useful in providing a snapshot of how investors view market conditions. The people who attend tend to be active investors with a considerable interest in what is going on in the investment world. Many are relatively sophisticated. Indeed, there were a few retired investment professionals of my acquaintance present.

It happened that the day this event was held, the US authorities announced they were looking at trying to stop BP paying a dividend until all the oil spill issues had been fully and properly dealt with. The shares dived on the news.

I could not resist asking the audience who among them held BP shares. Remarkably, nearly every hand shot up. Yet there was not a question on BP in the interactive session that concluded the event.

Perhaps more surprisingly, no one asked about capital gains tax. Given the potential hit our middle classes might be about to take next week (and a finer example of middle Scotland than those present in the Dunblane Hydro could not be found), I thought it a racing certainty that concern would be expressed. But silence and apparent contentment were the order of the day. I only hope they are all not moving blindly towards the abyss.

On the plus side, there does seem to be support for the index at around 5,000 – and don’t forget that a fair proportion of the fall in the FTSE can be laid at the door of BP, which had almost halved by the end of last week.

Moreover, despite the scare stories, many of which concern the future viability of the euro, governments do seem to be trying to get to grips with the high level of sovereign debt.

The biggest danger remains that the electorate will have no stomach for the consequences. Last week also saw the Bank of England leave rates on hold.

It was no surprise the monet ary policy committee felt unable to tighten at a time when our economic recovery appears so fragile but it must be remembered that inflation has been creeping up, with the RPI now more than 5 per cent and the CPI nearly double the Government’s target.

It will be interesting to see if George Osborne changes the Bank of England’s inflation guidelines.

The FTSE 100 conducted its usual quarterly review. Out went the London Stock Exchange and Thomas Cook. In came Essar Energy and African Barrick Gold, skewing this headline index even more towards resource stocks.

Just as interesting were the changes lower down the capitalisation stakes, with six companies dropping from the 250 index, replaced with an equal number rising from the small cap. While the effect on investors may be modest, the nature of these businesses tells a story.

Two of the demoted companies operated in financial services – Brewin Dolphin and F&C Asset Management. Coming up are gold miner Centamin Egypt, and Fidelity’s new China special situations investment trust. It says it all really – the Far East and gold are becoming more important than the City. Perhaps those Scottish investors have a cannier approach to asset allocation than I realised.

Brian Tora (brian.tora@centaur.co.uk) is principal of the Tora Partnership

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