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Analysis: Investors call 'peak pessimism' for beaten-up UK stocks

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Long-term gloom about Britain's economy appears to be lifting and some big investors reckon the end of extreme pessimism is near, with gains ahead for UK-focused businesses and the more international but long-shunned FTSE 100. After years of outflows and big companies such as materials group CRH moving stock listings overseas, the UK's FTSE All Share index is valued at around 2.28 trillion pounds ($2.84 trillion). That's roughly the same as a single U.S. stock, Apple , while British companies are trading at around a record discount to global equities.

High government debt, crumbling infrastructure, political turmoil and 14 rate hikes since late 2021 have hurt sentiment.contract by 0.5% in JulyYet, the economy has not entered recession as feared and official statisticians have sharply upgraded data to show the UKUK-based investors said they are increasing holdings of domestic businesses and taking advantage of low valuations for the FTSE-100.

"It feels like we've passed the peak of pessimism about the UK," said Daniel Lockyer, senior fund manager at 7 billion-pound investment and advice group Hawksmoor Investment Management, which increased its exposure to UK companies in August. "We don't necessarily need to see a huge bout of positive news, but the trend of negativity is slowing and the key to making money in any market is to get in at the bottom and capture the start of a turnaround."A cumulative 76 billion pounds has flowed out of UK equity funds since 2016, data provider Morningstar said, with the bulk of outflows in the last three years. Global equity funds tracked by Morningstar have had 507 billion pounds of net inflows since 2016.

UK pension funds, enticed by better returns overseas, have cut allocations to UK equities to 6% from 53% 25 years ago, according to think tank New Financial.

 

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