Mind the valuation gap
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MIND THE VALUATION GAP
British shares are historically cheap and continue to trade at lower multiples than their European and U.S. counterparts. But political stability could see that valuation gap close, according to Man Group.
Polls are indicating that the opposition Labour Party will win a historic majority after the July 4 vote, possibly greater than their landslide win in 1997, as the incumbent Conservative Party leaks support on all sides following 14 years in power.
"For UK equities in general, a working and stable majority taking a centrist and fiscally cautious stance would be welcome versus recent history," Man Group writes in a blog post.
"We believe this should allow the valuation of UK equities to catch up versus European peers."
The FTSE 100 .FTSE, with a 12-month forward PE ratio of 11.5, trades at a discount to both Europe and the U.S., a gap that has grown in recent years.
"Our sense is that following the election, the narrative will quickly return to monetary policy and the beginning of the rate cutting cycle," Man Group says.
"We also expect M&A activity to continue, likely leading to an improvement in IPO activity. In short, we believe a Labour majority could bring a long-awaited boost to UK equities."
(Samuel Indyk)
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TUESDAY'S OTHER LIVE MARKETS POSTS:
LIBERTÉ, EGALITÉ, ANXIÉTÉ? INVESTORS FRET OVER FRANCE CLICK HERE
VOLATILITY HOLDS CLUES AMID NVIDIA SELL-OFF CLICK HERE
POSITIONING FOR POLITICAL UNCERTAINTY CLICK HERE
EUROPEAN SHARES DROP, AEROSPACE STOCKS HAMMERED CLICK HERE
EUROPEAN FUTURES SIGNAL SOFT START CLICK HERE
TECH ROUT DRIVES FLIGHT TO VALUECLICK HERE
The far right fared better in areas with lower incomes https://reut.rs/3VnL2p6
European shares mostly lower https://reut.rs/3L0bYXw
Vive la difference - or not https://reut.rs/3xAUQV1
UK discount https://tmsnrt.rs/3xkMot6
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