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Global investors wake up to cheap UK stocks as takeover activity rises
Jupiter Asset Management boss says London-listed shares are ‘cheapest they have been in 50 years’
Lemah Islam
May 20, 2024
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Global investors wake up to cheap UK stocks as takeover activity rises
Jupiter Asset Management boss says London-listed shares are ‘cheapest they have been in 50 years’
Summary
Global Investors “are finally waking up” to cheap London-listed stocks as takeover activity picks up, in a sign that Britain’s equity market could soon face a “flood” of investment, UK asset managers have said.
Matthew Beesley, chief executive of Jupiter Asset Management, said international investors were now turning to UK stocks because they were the “cheapest they have been” and trading at a hefty discount to their US rivals.
He pointed to the increasing acquisition activity and interest from institutional investors in UK equity funds following a lengthy period of outflows.
The rise in deal activity around UK companies, such as Australian miner BHP’s bid for London-listed rival Anglo American and Daniel Kretinsky improved offer for Royal Mail’s parent company, should provide a boost to domestic stock prices, he added.
FTSE 100 index reached another record high on Wednesday, having risen nearly 10% year to date. as investors search for value opportunities and as the UK economy pulls out of recession.
Fund managers believe that cheap valuations combined with an improved economic outlook and an uptick in deals will boost UK stocks and attract further investment.
Other fund managers pointed to the rise in share buybacks when companies use excess capital to purchase their stock.
Definition Section
Words | Definition |
|---|---|
Stocks | A stock, also known as equity, is a security that represents the ownership of a fraction of the issuing corporation. Units of stock are called shares, which entitle the owner to a proportion of the corporation’s assets and profits equal to how much stock they own. |
Equity | Equity referred to as shareholders’ equity (or owners’ equity for privately held companies), represents the amount of money that would be returned to a company’s shareholders if all the assets were liquidated and all the company’s debts were paid off in the case of liquidation. In case of acquisition, it is the value of company sales minus any liabilities owed by the company not transferred with the sale. |
Acquisition | a transaction in which one company purchases most or all of the other company’s shares to gain control of that company. Acquisitions are common in business and may occur with or without the target company’s approval. There’s often a no-shop clause during the proceeds of approval. |
Outflows | A large amount of money or people move from one place to another. |
Recession | A recession is a significant, widespread, and prolonged downturn in economic activity. A common rule of thumb is that two consecutive quarters of negative gross domestic product (GDP) growth indicate a recession. However, more complex formulas are also used to determine recessions. |
Stock Buybacks | a stock buyback occurs when a company buys back its shares from the marketplace with its accumulated cash. Also known as a share repurchase, a stock buyback allows the company to re-invest in itself. The repurchased shares are absorbed by the company, reducing the number of outstanding shares on the market. |
No-Shop Clause | a no-shop clause found in an agreement between a seller and a potential buyer that bars the seller from soliciting a purchase proposal from any other party. In other words, the seller cannot shop the business or asset around once a letter of intent or agreement in principle is entered into between the seller and the potential buyer. The letter of intent outlines one party’s commitment to do business and/or execute a deal with another. Also, known as no solicitation clauses. |
Analysis
What could be the wake-up call for foreign investors?
The increasing acquisition activity and interest from institutional investors in UK equity funds following a lengthy period of outflows.
Cheap valuation combined with an improved economic outlook and an uptick in deals will boost UK stocks and attract further investment.
Rise of share buybacks, such as Barclays, had “substantial” buyback plans.
These factors needed to be considered by investors to make a decision and list their companies on the London Stock Exchange.
Many of the companies listed on the London Stock Exchange, ditched for the New York Stock Exchange. Therefore, it is a question in fact whether the London Stock Exchange will be able to get a flood of investment in the next few years. As this may help the economy to boost further.
Conclusion
I am in the hope that we get a flood of investors attracted to the LSE. The economy has been shattered for years since Covid-19 and then the war in Ukraine. Bank of England, also failed to make accurate predictions and because of that the commercial sector has also been hit very badly.
Hope you enjoyed it! If anyone wants to write commercial newsletters, let me know! It really helps with developing a better commercial understanding.
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