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EDITIONS
 Thursday, 19 December, 2002, 08:18 GMT
The stock market's rocky year
Stock market trader
2002 was miserable for many, but profitable for a few


2002 was a great year for shares.

If, that is, you owned stock in big tobacco, furniture polish makers or cruise liners.

Of the UK's 100 leading listed firms, only 15 or so had shares that were more valuable at the end of the year than at the start.

For everything else, there was misery. As a whole, the FTSE 100 index lost another quarter of its value in 2002 - its third straight year of decline.

Battered

After holding its own in the first few months, our main stock market index slumped in early summer, sent sprawling by the weight of company scandals in the United States.

The London market was also concerned by how little profit British companies were making at home and abroad, particularly in the US.

FTSE 100 index
The telecoms and technology industries were dogged by their huge debts, and overcapacity in the industry.

Nor did smaller companies fare much better: the FTSE 250 lost as much ground as its bigger sibling, while the tech-heavy Techmark 100 halved in value.

It was more bad news for anyone who put their cash into mainstream tracker funds - they lost yet another shirt off their back.

Smash and grab

But there were money-spinning shares for those clever or lucky enough to spot them in time.

The people who made profits in 2002 were those who staged smash and grab raids - buying the right shares at the right time, and then dumping them before the gains turned cold.

Best of the lot was Imperial Tobacco - up by one-third over the year, while its rival, Gallagher, gained one-quarter.

Others had more modest rises - they included the home cleaning giant Reckitt Benckiser, the detergent diva Unilever and the sugar, bread and biscuit king ABF.

Not-so-hardy perennials

That list shows just how much stuffing was knocked out of investors this year.

The companies that gained were those that can't fail to turn a penny, even in the deepest of economic freezes. These are the hardy perennials of the investment garden - and they were almost the only ones to survive this year's permafrost.

The old reliables were unreliable. The privatisation shares - BA, BT, Centrica and BAA - fell.

So did the new banks - HBOS, Abbey National, Alliance & Leicester.

And football mad investors were as sick as a parrot - again - as the soccer stocks like Chelsea, Man United and Newcastle United continued their series of market own-goals.

Horror stories

Then there were the year's heart-stoppers.

MyTravel drove investors to the edge with a string of profit warnings - and it's not out of the woods yet.

British Energy went over the edge, kept in business by an emergency cash bailout from the government.

A sticking plaster rescue saw old debts swapped for new equity - that wiped out existing shareholders, and (unusually) knocked the bondholders back too.

But it still needs a long-term solution - and it has until March 2003 to get it.

Abbey National lost heavily in risky loans to firms like Enron, and saw its share price collapse by half, before the boss finally quit. The new boss has put it on a strict "back to basics" diet.

If that wasn't enough, Cable and Wireless turned in a 4bn loss and slashed the value of its business.

Getting a grip

But there are other signs of hope - signs that companies can get a grip on themselves, and restore their fortunes.

Despite BA's turbulent year, flying out of the FTSE 100 and then back in again, analysts say its "Future Shape" restructuring is starting to turn the business round.

Marks & Spencer and Sainsbury continued to regain their strength, but both are now headed for some rough weather, as slowing spending on the High Street hits their sales growth.

And our international hotel companies - Six Continents and Whitbread - seem to be picking up again after the stresses of September 11 and the strains of their own restructurings.

So when will the market misery end?

When many more companies go bust, say the optimists. That will strip out the surplus supply across business, from telecoms to technology, holidays to adverts.

The pessimists tell a completely different story. Some of them say we're in for a long patch of gloom, with markets staying flat or falling for the rest of the decade - or longer.

The honest truth is that no-one knows. But don't forget - shares can go up as well as down.


World perspective

UK in focus
See also:

06 Dec 02 | Business
16 Jul 02 | Business
13 Feb 02 | Business
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