Where are the safe havens? If you assume that the past couple of weeks of market turbulence adds up to more than a row of beans, now is the time to take some risk out of portfolios.

It is the second time in less than a year that the financial world has found itself buffeted. It is possible to exaggerate the predictive power of financial markets. But traders, sometimes feckless and often frisky, may be on to something and it may not be good news.

It is possible to put the near10 per cent fall in the Shanghai market on one side, just as it is probably best to take the bearish comments of Alan Greenspan, the former Chairman of the US Federal Reserve, with a big pinch of salt.

The Shanghai shudder ought to be seen as an isolated case of profit-taking by Chinese investors returning after their new-year holiday to the realisation that the previous 12 to 18 months had delivered them lots of profits to take. Meanwhile, Mr Greenspan’s eminent reputation outpunched the logic of his arguments.

The volatility is nonetheless nerve-wrenching for all that. Corporates and individuals are laden with debt. Interest rates are tightening in many parts of the world and, perhaps most worrying of all, too many observers appear complacent about the strength of the investment backdrop.

The conventional wisdom is that investors should shun equities in times of trouble in favour of cash, bonds and gold. But UK equities, thanks mostly to some solid looking valuation benchmarks, and partly because ownership brings UK investors no currency risk, should not be ignored by the safety-first brigade.

You can never go far wrong with cash, and if interest rates are rising deposit accounts, or similar, are hard to dislike. Bonds are less attractive during a period of rising interest rates, especially if inflation is rising as well. Pension funds, which have chased bonds as desirable liability matching assets, have also left the assets struggling to show obvious value.

The bull market in enthusiasm for most commodities, including gold, leaves value-for-money questions hanging over precious metals too. Commercial and residential property, meanwhile, have had a strong run and are similarly challenged in valuation terms.

So what about equities? The two oldest valuation tools — the price earnings ratio and the dividend yield suggest that that shares are a long way from being over priced. The chart shows how the p/e ratio has risen over the past six months, but it grew from a low base only to about the same point as two years ago.

The recent share price falls — the FTSE 100 has lost 3 per cent in the past month — help to make the valuation benchmarks look more reasonable. But the market value weighted ten-year average historic price earnings ratio for the FTSE 350 suggests shares are positively cheap. The current figure is 15.9 compared with a ten-year average of 19.4 and a peak, hit in March 2000, of 29.1.

Dividend statistics are not as convincing, but do not support the notion that shares are expensive. The historic yield on FTSE 350 shares is bang in line with the ten-year average of 2.87 per cent.

The average hides wide variations from stock to stock. Cairn Energy, the oil explorer with exciting Indian territories under development, sits on a prospective p/e of 124 while shares in Beazley, the insurer, trade at barely seven times earnings per share estimates for the coming year. Likewise with the dividend, British Energy tops the chart with a forward yield of 8.2 per cent while 60 shares in the FTSE 350 pay no dividend at all.

Larger shares are cheaper than smaller ones, although there is no straight-line trend between the two.

The 25 largest FTSE 100 shares trade on an unweighted average prospective p/e ratio of 12.8 while stocks in the middle of the FTSE 250 (stocks ranking between 150 and 300 in terms of market capitalisation) sit on an average multiple of forward earnings of 20.8. The largest 25 FTSE 100 shares give a forward yield of 3.5 per cent while middle-sized stocks ranking in size between 150 and 300 pay only 2.6 per cent.

The upshot from this suggests that British investors can be comfortable in the knowledge that UK shares, in general, should retain their value. If the data is examined more closely however, safer havens can be identified.

This quest for safe haven equities is made easier thanks to the search engine on the Hemscott Guru stock market database. Hemscott allows investors to select several low-risk criteria in combination. It is possible to find stocks on a below average p/e ratio and an above average dividend yield. Simultaneously, you can identify stocks with dividends that are well covered by earnings that are growing.

There are 15 stocks in the FTSE 350 which sit on p/e ratio of 16 or less, yield at least 3.5 per cent, having their dividend covered at least two times by earnings and are forecast to raise their earnings per share by at least 5 per cent in the next 12 months.

There are three banks in the group: Royal Bank of Scotland, HBOS and Northern Rock; there are three insurers: Old Mutual, Standard Life and Beazley; there are two engineers: FKI and IMI; and two food producers: Tate & Lyle and Dairy Crest.

BP, the oil giant, Persimmon, the house builder Pendragon, the car dealer, and GlaxoSmithKline, the pharmaceuticals company, completes the list.

This does not equate to a foolproof portfolio that is guaranteed to weather any kind of storm that will hit the financial markets. It does, however, serve to put current turbulence in perspective.

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