British stocks are benefitting from political turbulence in France, a City investor has said.
In recent weeks there has been a flood of investment into UK markets, with funds seeking stability amid the chaos of Emmanuel Macron’s snap election.
Isabel Albarran, investment officer at Close Brothers Asset Management, said there has been a sharp rise in demand for UK assets, which are increasingly being viewed as a safe haven.
This has been driven by uncertainty surrounding France’s election, she said, which compares to Labour’s expected victory at the polls on Thursday.
Ms Albarran said: “Sell-side firms we speak with have seen a steady pick-up in UK net inflows in the last month.
“One firm reported net inflows of c. $350m [£276m] last week, 20 times the net inflow of the week after the UK election announcement.”
She added that another bank had reported “a fourth straight week of outflows” from the Eurostoxx 50, Europe’s blue-chip index.
Turmoil has been reflected across French banking stocks, which have fallen 9pc since Mr Macron called his snap election last month.
This has led to hedge funds seeking to profit from the turmoil, she said.
Ms Albarran, whose firm manages £17bn of assets, said: “There have been especially hedge funds taking selling positions in the euro, so caution on European assets in general and then we have also seen a bit of a hit for Eurozone financials as a result.”
British banks have been the biggest beneficiaries from this, Ms Albarran added.
It comes as separate figures for June showed that the amount of money flowing out of the British stock market has slowed significantly since the start of the year.
The second half of June also saw significantly less selling than the first, according to the largest global fund network Calastone.
Market jitters sparked by France’s election have calmed somewhat after the results from the first round of the parliamentary elections failed to give Marine Le Pan’s National Rally an outright majority.
However, the outlook for the French economy still looks challenging given its growing debt pile.
Ms Albarran said: “A lot of the optimism about France had relied on Mr Macron being able to continue to deliver legislative reform. That is going to be really difficult if you have a parliament that is at odds with you.”
That is compared to recent stability in the UK, which Ms Albarran said is a “demonstration of what markets do and don’t like”.
British equities have long been considered cheap compared with stocks in other markets, fuelled by a discount post-Brexit.
While there is still a long way to go to close that gap, Ms Albarran said a large Labour majority would increase demand for UK stocks.
She said: “Markets like stability and clarity from a political perspective. The fact that we have seen a bit more interest over recent weeks is quite encouraging.”
“If the UK is in a period of political stability, especially if it can deliver better growth, then it might look a more attractive prospect if Europe suddenly is in a more existential crisis.”
Keith Balmer, a portfolio manager at Columbia Threadneedle Investments, shared this sentiment, saying foreign investors would again start to look to the UK.
He said: “With the expectation of a two-term Labour government, the least that we should hope for is greater stability and longer-term planning. This should attract international investors back to the UK.”
Broaden your horizons with award-winning British journalism. Try The Telegraph free for 3 months with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
From: Yahoo.com
Financial News
