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BlackRock Bets on UK Stocks as Labour Win Signals Stability

(Bloomberg)

(Bloomberg) -- The UK stock market is set to lure back offshore investors after Labour’s landslide election victory signaled the start of an era of little political upheaval, according to strategists at BlackRock Investment Institute.

“We are now overweight UK equity market,” Wei Li, BlackRock’s global chief investment strategist, told reporters in London on Wednesday. “Valuation is attractive — it has been the case for a while — but now we have a catalyst of potentially perceived political stability that could act as a trigger for international sentiment to warm up.”

Unpopular for years, UK stocks are increasingly looking like a haven for investors who are confronted with heightened political risk in Europe and the US. The FTSE 350 index has outperformed most comparable European gauges since the beginning of April on the back of cheap valuations and an improved economic outlook.

Britain, alongside Spain, was named investors’ most favored European equity market in Bank of America’s June fund manager survey. Globally, underweight positions on UK stocks have reached a one-year low, yet there appears to be plenty of scope for more buying, with a net 12% of survey respondents still underweight on the country. 

“In terms of the point around the UK more broadly, the one we’re highlighting right now is this idea of the perception of market risk,” said Vivek Paul, UK chief investment strategist at BlackRock. “Whether or not some of the macro dynamics shift is something that we’re going to have to learn as time goes on.”

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