Bosses reckon it's time to sell

COMPANY directors have lost faith in a stock market recovery, and a growing number are cashing in shares in their businesses. The total jumped last month to the highest since last August.

The figures, compiled by company research website DigitalLook for Financial Mail, mark an abrupt reversal of the buying trend of the past six months. This coincides with a halt to the stock market's recent rally and it will be seen as a powerful 'sell' signal for other investors.

James Monier of investment bank Dresdner Kleinwort Wasserstein said: 'These figures are a powerful indicator. Insiders in companies should be in a good position to judge what is happening in their own businesses.'

The shares slump after 11 September triggered a buying spree by UK directors. In that month, they spent £30m on shares in their own firms.

Buyers outnumbered sellers by five to one - twice the average in the previous 12 months. This continued in October, with buyers outnumbering sellers by four to one, then over the next four months the ratio returned to its historic average.

But in March, 221 directors sold shares to send the ratio of buyers to sellers below two to one - less than the average for last year.

The research comes as the apparent bounce in the stock market has stalled, and it suggests that, for the moment, even company directors are doubtful about any further significant gains.

After the September attacks, the FTSE 100 index fell to 4438 before rallying by more than 20%. But hopes of a sustained rise in the market have faded in the past two weeks.

Directors' share trading may be influenced by seasonal issues such as the end of the tax year, but Monier said the tax case for buying and selling should balance out, and that few directors would be motivated by short-term concerns. 'They would be more long-term than that in their thinking,' he said.

The boardroom caution is even more pronounced in America, where directors' share buying reached record levels in October and November but has since gone into reverse. Share sales there have been three times the value of those bought, says Monier.

In the past two weeks, leading sellers in Britain have included directors of packaging group Rexam, whose chief executive Rolf Borjesson sold £2.7m worth. And George Iacobescu, chief executive of Canary Wharf Group, sold nearly £1m of his shareholding. At Bovis Homes, chief executive Malcolm Harris and finance director Ron Walford have together sold shares worth £2.4m.