The valuation of the UK stock market is at a sharp discount, and new capital inflows may push it to outperform US stocks in the second half of the year
British shares, the cheapest in the world, are now fertile hunting grounds for some investors looking for attractive assets.
Britain’s FTSE 100 is now trading at about a 50% discount to both the S&P 500 and the MSCI World Index, the biggest discount since 2005, according to data compiled by agencies.
Joachim Klement, director of British investment bank Liberum, said that whenever UK stocks are at such a low level relative to US and global equities, foreign investment starts to attract.
“Stick inflation and concerns about further rate hikes from the Bank of England have resulted in deep discounts for UK equities relative to US equity valuations.
We have already seen the first signs of new money flowing into UK equities, and if this trend continues, this could boost valuations and push UK equities to outperform US equities in the second half of 2023. “