Figures released by the Association of Unit Trusts and and Investment Funds showed gross sales up 35 per cent year-on-year in July at over pounds 3.3bn. Total funds under management were steady at pounds 188bn.
The popularity of the Personal Equity Plan remains undimmed despite the fact that they are shortly to be replaced by the Individual Savings Account. Gross PEP sales were up 12.7 per cent against July 1997.
The figures came before the latest bout of turmoil which has pulled the FTSE down some 10 per cent from its July peak.
Philip Warland, Autif director general, said the figures showed that retail investors had been big buyers of gilts and Continental European stocks, which have both been having a good run in anticipation of slower UK growth and strong economic performance in the big European economies next year. "They have actually been quite shrewd."
Retail investors have tended to be holders of the UK market rather than sellers. That is in sharp contrast to the behaviour of pension funds who collectively took pounds 2.5bn out of the UK stock market in the first quarter.
Pension funds are now less fully invested in UK equities than at any time since the October 1987 crash.
Redemptions are up on June, but no more than would be expected during the summer lull. "There is no hint of panic. Unlike October 1987 when many people had just gone into the market, retail investors are on the whole now sitting on several years of gains, and are just sitting there doing nothing," he said.
He added that there is evidence, too, that more people are investing in the stock market through regular savings plans, which reduce the risk of investors being badly hit by sudden market moves.
Both retail and institutional investors have been cutting exposure to the UK smaller company sector and to the Far East, excluding Japan.
Investors were net sellers of smaller companies to the tune of pounds 136bn in July, and of Far East excluding Japan to the tune of pounds 172bn, according to the Autif figures
They were also net sellers of Japan and global markets generally in favour of more stable markets closer to home.