Day-Traders Return to European Markets with a Bang

Strategic Insights -

Europe's day-traders are back with a vengeance, much to the chagrin of some market experts who are warning of a potential bubble. Since the market bottomed out in March 2003, retail investors in Germany, Scandinavia, and the UK have been flocking to online brokerages, resulting in a significant increase in trading activity. This resurgence is not just limited to professional day-traders, but also includes hobbyists and those with other jobs who trade on the side.

Key Takeaways:

  • Retail investors in Germany, Scandinavia, and the UK have regained their confidence in equities and are taking advantage of the past year's rally, leading to a significant increase in trading activity.
  • The Nordic region's largest internet brokerage, Nordnet, has seen a complete explosion in trading activity in January and February, with as many day-traders in the region today as at the market's peak in March 2000.
  • The value of trades made through internet brokers in Sweden surpassed the SKr31.4bn (Pounds 2.3bn) of March 2000 for the first time in January this year when SKr47.1bn was traded.
  • Daily trades by retail investors in the UK rose to 50,000 in December from 30,000 at the start of last year, according to the Association of Private Client Investment Managers and Stockbrokers.
  • Many private investors, including those who have other jobs, are trading on the side, often focusing on highly liquid, volatile stocks such as Allianz, Deutsche Telekom, Infineon, and Singulus.
  • The increased day-trading activity has contributed to a rise in the shares of companies such as Ericsson, up 67 per cent this year, and Nokia, which has risen 31 per cent.
  • However, market experts are warning of a potential bubble, citing the hallmarks of an irrational market where people are "shortening their time horizon" and "forgetting what happened four years ago."

Statistics:

  • The value of trades made through internet brokers in Sweden surpassed SKr31.4bn (Pounds 2.3bn) in January for the first time since March 2000, reaching SKr47.1bn.
  • Daily trades by retail investors in the UK rose to 50,000 in December from 30,000 at the start of last year.
  • Traders in the Nordic region made 55 million trades in January and February this year, with an average of 2,500 trades per day.
  • The Nordic region's online broker Nordnet has seen a 20% increase in new client accounts and a 30% increase in trading volumes since the start of the year.

Sources:

  • "We're still a long way from the money-making of 1999 and 2000," says Theodor Schmidt, a German day-trader.
  • "There's been a complete explosion in trading activity in January and February," says Klas Danielsson, chief executive of Nordnet.
  • "If you extrapolate the March trading turnover so far, this is one of the best months for at least a year," says Stefan Middelhoff, trading manager at Sino.
  • The value of trades made through internet brokers in Sweden surpassed SKr31.4bn (Pounds 2.3bn) in January for the first time since March 2000, reaching SKr47.1bn. (Source: The Financial Times, January 2004)
  • Retail investors in the UK made 50,000 daily trades in December, up from 30,000 at the start of last year. (Source: Association of Private Client Investment Managers and Stockbrokers)