UK Market = Long Term Rally27 Dec 2020 10:51
£1tn+ left the UK market after BREXIT, the money was invested in other countries markets. Now with a BREXIT deal in the bag, a lot of that money can flow back in and ii/HNW will want to diversify back into the UK market and pick up the bargain stocks. I see a long term market rally ahead. Hopefully with the big press coverage, AFC will become a hot stock in this.
Brexit Cloud Clears for the World’s Most Unpopular Stock Market
The country has been the worst performer among major equity markets since the 2016 Brexit referendum, both in local currency and dollar terms. For investors who have steered clear of U.K. shares during the period, their cheapness may hold allure as value stocks are forecast to shine in the coming year.
“The last-minute deal between the EU and the U.K. is a good case to be made for the U.K. market in the context of value hunting,” said Oddo BHF strategist Sylvain Goyon. “The ‘end’ of the Brexit saga could be an interesting trigger to rediscover the FTSE 100.” The benchmark is geared toward industries that are sensitive to the expected synchronized economic recovery in 2021, Goyon added, with materials, energy and financials accounting for about 40% of the index.
The agreement will allow for tariff and quota-free trade in goods after Dec. 31, but that won’t apply to the services industry -- about 80% of the U.K. economy -- or the financial services sector. Firms exporting goods will also face a race to prepare for the return of customs and border checks at the year-end amid warnings of disruption at Britain’s ports.
The exporter-heavy FTSE 100 has risen 2.5% since the 2016 vote, underperforming the 14% gain for a broad regional benchmark, the Stoxx Europe 600 Index, despite a boost from the falling pound. In dollar terms, the U.K. index has fallen 6.7%.
In another sign of the U.K.’s unpopularity, investors paid little heed to the market-leading earnings growth of FTSE 100 companies, put off by the lack of visibility on Brexit. That has left British stocks trading near record-low valuations relative to global stocks, based on estimated earnings.
Most U.K. sectors trade at a “substantial discount” to both European and U.S. peers, Goldman said. The firm is overweight the FTSE 100 relative to the Stoxx Europe 600 Index, citing compelling valuations and a tilt toward value shares and sees the megacap gauge as far less sensitive to Brexit outcomes than FTSE 250 or domestic stocks.
Within the U.K., stocks that have borne the brunt of dragging negotiations are also likely to benefit the most from the resolution, including banks and homebuilders. And while a strong pound typically weighs on the FTSE 100, the two have enjoyed a positive correlation since October.
Financial and energy shares, which have a heavy weighting in the megacap gauge, may also get a further boost from the value trade.
https://www.bloomberg.com/amp/news/articles/2020-12-26/brexit-cloud-clears-for-the-world-s-most-unpopular-stock-marke
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