"Unbelievably cheap" British stocks set to benefit from rate cuts
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"UNBELIEVABLY CHEAP" BRITISH STOCKS SET TO BENEFIT FROM RATE CUTS
It's no secret that British stocks are cheap, trading at multiples far lower than their counterparts in the U.S., and this could create an opportunity in mid-caps as interest rates start to fall, according to Martin Currie CIO Michael Browne.
"If we're going to have a rally on the back of interest rates, the place you want to be is UK PLC - that's the FTSE 250," Browne told Reuters in an interview.
"There are retailers in there, there are housebuilders in there, so there's that interest rate sensitivity," Browne said, adding that UK shares were "unbelievably cheap".
Traders expect interest rates to fall in the UK in the third quarter, probably before the Federal Reserve but likely after the ECB, who are expected to cut rates in June.
Browne notes robust growth, M&A activity and possible inflows from pension funds, which he says are underweight British stocks, as other factors that could drive UK markets higher.
"Is the UK cheap? Yes. Is it growing? Yes. Has it outperformed the majority of European economies in the last few years? Yes. Is there cash flow? Yes," Browne highlights.
"That's quite a potent cocktail."
Jeff Weniger, head of equity strategy at WisdomTree, also separately told Reuters British stocks look cheap.
He highlighted the country's sector exposure to metals and mining and the push to get domestic pensions to invest more in UK equities as a potential positive, part of the government's response to fears London's capital markets hub status is under threat .
"I think that there's a real questioning in London and a real realization that something needs to be done to maintain the Square Mile as this global financial centre because it's really fallen by the wayside," said Weniger.
(Samuel Indyk)
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