FTSE 100 Hits Record High Despite UK Investor Disinterest
The FTSE 100 has reached a record high this week, yet UK stocks are facing investor disinterest and outflows. Despite the UK economy's resilience and the index's strong performance, investors are seeking opportunities elsewhere.
The UK economy has shown surprising resilience in 2024, even after a mild recession late last year. However, investors are pulling out of UK equity funds, with outflows totalling £13.6 billion in 2023 alone. Liontrust, for instance, experienced net outflows of over £6 billion.
Investors' disinterest can be attributed to several factors. Brexit-related uncertainties continue to cast a shadow, while the FTSE 100's valuation, though at a discount to global equities, is still relatively higher. Additionally, investors might be drawn to more promising or stable opportunities in other regions or sectors.
Contrary to the lack of interest from local investors, private equity buyers overseas have been attracted to UK public companies. They see cheap valuations as an opportunity. Meanwhile, the IMF forecasts UK GDP growth of 0.5% in 2024, the second-slowest in the G7 after Germany.
The FTSE 100's record close this week does not reflect expensive UK stocks, trading at around 11 times earnings. Despite the UK economy's resilience and global exposure offered by UK equities, investors remain cautious. The UK's overreliance on gas for heating has also contributed to stickier inflation compared to the eurozone and the US. As the UK navigates these challenges, the future of its equity market remains uncertain.
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