(Bloomberg) — Britain’s stock market is getting back on its feet.
Less than a year after losing the crown of Europe’s biggest equity market, London looks set to recapture it from Paris, as the rally in French luxury shares falters.
The combined dollar-based market capitalization of primary British listings stands now at $2.90 trillion versus France’s $2.93 trillion, according to an index compiled by Bloomberg. The gap between the two has narrowed steadily, primarily driven by a slide in France’s value from last year’s $3.5 trillion record as economic gloom in the key Chinese market deepens.
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London, meanwhile, is seeing signs of investor bullishness for the first time in years, with HSBC Holdings Plc, Barclays Plc and JPMorgan Chase & Co. strategists all predicting upside for a market long tarnished by the Brexit overhang. It’s a marked change in tone from last year when a Bank of America Corp investor survey ranked UK the most disliked market globally.
Barclays’ strategist Emmanuel Cau reckons the UK market is currently a “good place to hide” and expects that energy exposure and easing inflation could spark “meaningful” investment inflows. His counterpart at HSBC, Max Kettner, turned bullish on UK equities this week for the first time since May 2021.
So what’s going right for the UK? First, its stocks are benefiting from a 30% rally in oil in the past three months. Second, inflation is finally cooling, potentially enabling the Bank of England to end its 22-month policy-tightening cycle. That in turn could weaken the pound versus the dollar, crucial for an index packed with exporters’ stocks.
BofA data from the latest week showed outflows from UK equity funds are still continuing, reversing a brief interlude of gains in mid-September. There’s certainly scope for investors to add to UK positions — global funds still have a net 22% underweight on the market, the most bearish in almost a year, according to a BofA survey.
