This translation has been automatically generated and has not been verified for accuracy.The scale of Boris Johnson’s election victory on Thursday may be enough to draw back billions of pounds of investment that have sidestepped UK stocks for years over Brexit, mirroring the U.S. market surge seen after Donald Trump’s election three years ago.
Companies with strong exposure to the domestic economy have been a no-go zone for investors ever since Britain voted in 2016 to exit the European Union, a factor that has led to massive outflows out of equity funds. For more than three years, the looming menace of a disorderly Brexit had acted as a drag on UK stocks which have underperformed their European and U.S. peers since the referendum.
And - as per Friday’s exchanges - positive noises between London and Brussels about a free trade agreement will be important.In the immediate aftermath of Trump’s victory, the U.S. small business optimism index, released in Jan 2017, posted its biggest rise in 30 years. The S&P 500 soared 20% that year.In the UK, investors will be keenly looking into similar signals from business sentiment surveys, such as the Purchasing Managers’ Index as soon as January.
“Within the UK, you are going to have more commitment of capital to projects and businesses than we’ve had previously.”For years, UK companies exposed to the domestic economy such as housebuilders, banks, retailers and utilities have been under pressure and were under-owned in global asset managers’ portfolios.Johnson’s win boosted housebuilding stocks Taylor Wimpey , Berkeley Holdings and Persimmon to record highs on Friday.