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Property securities took over from financials as the most discounted sector, at 30.8 per cent compared to 24.6 per cent at the beginning of May.

Chris Young, an analyst at Arbuthnot Securities, said a large number of investors were chasing the small Japanese sectors where valuations looked cheap.

"We've had some good GDP data out and support for the currency," he said. "It's natural people are buying back in."

Adverse sentiment affected the AIC's Property Securities, UK Growth and Income, Asia Pacific inc Japan, Global Emerging Markets and Environmental sectors. In particular, Environmental declined from a 0.1 per cent premium to a 2.1 per cent discount.

Mr Young said environmental plays were still economically sensitive. "In this kind of market, premiums do not hold up."

Mr Young said property securities and UK growth and income were sensitive to the problems in financials, particularly given the many high-yielding UK stocks in the industry. He argued emerging markets investment trusts were also still suffering from the market fallout earlier this year.

A number of developments offset these trends, particularly the narrowing of the average discount in Financials from 26.8-25.1 per cent. Mr Young said trading was difficult as the players in the sector were smaller. "People are reluctant to sell down," he added.

But Mr Young was at a loss over the widening discounts in Asia inc Japan after discounts narrowed in the Japanese and Asia Pacific ex Japan peer groups.