Big fund managers bet on political stability to revitalize London market
Date
7/28/2024 7:45:52 AM
(MENAFN) Prominent fund managers, including BlackRock, Allianz, Rover, and Rathbones, are increasingly optimistic about the London stock market, anticipating that political stability will enhance the market's performance. These investors are positioning themselves for a potential resurgence in the value of British shares, driven by an improving Economy and the prospect of lower interest rates. After years of lagging behind European and US markets, UK-listed stocks are now seen as attractively priced.
Global asset managers such as BlackRock and Allianz, along with British counterparts like Rover and Rathbones, are increasing their exposure to UK stocks. This shift comes as UK valuations appear more favorable following prolonged underperformance. Data from Bank of America indicates a notable change, with institutional clients transitioning from selling UK stocks to buying them since May, reversing a long-term trend.
Mid-cap UK stocks, closely tied to the domestic economy, have experienced three consecutive months of inflows, according to Morningstar data. This marks the first such trend since November 2022. Rebecca McLean, investment director at Aberdeen, highlighted a significant change in sentiment towards the UK, noting that declining inflation and the possibility of a landslide victory for the Labour Party in upcoming elections could lead to a stable government. She remarked that "early indications point to a shift in flows to British equities."
This newfound optimism follows eight challenging years for British equities since the 2016 EU referendum. The London Stock Exchange has seen a steady outflow of companies, fueling concerns about its future. Despite low valuations attracting bargain hunters, the returns have been disappointing. Over the past five years, the FTSE 100 has yielded a 30 percent return, compared to a 45 percent gain for the Stoxx Europe 600 and a remarkable 94 percent rise for Wall Street's S&P 500. Investors are hopeful that the tide is finally turning for UK stocks.
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