Growing Interest in UK Shares

The London stock market has emerged as the preferred choice for European investors, signaling a significant shift in sentiment towards UK-listed shares. A recent survey by Bank of America indicates that a growing number of investors plan to increase their holdings in UK equities over the next year, contrasting sharply with the declining interest in stock markets across Germany, France, Italy, and Spain. This change comes as economic sentiment in the eurozone plummets, with reports highlighting the fastest decline since the onset of the pandemic. Germany, the eurozone's largest economy, is experiencing its most significant economic downturn in two years, according to the ZEW economic research institute. ZEW president Achim Wambach noted that the economic outlook in Germany is deteriorating, while Deutsche Bank's chief German economist, Robin Winkler, remarked that optimism for recovery has "completely evaporated." This bleak outlook is exacerbated by political instability in France and fears of a recession in Germany, raising concerns about a potential economic contraction. Tomasz Wieladek, chief European economist at T Rowe Price, warned of a "real risk" that Germany's output could shrink this year, potentially leading to a cycle of declining expectations and growth. In contrast, Panmure Liberum's chief economist Simon French highlighted the attractiveness of the UK market, suggesting that investors are beginning to recognize the value and growth potential available in the UK, especially if stability is achieved. The Bank of America survey revealed a dramatic increase in investor confidence towards UK equities, with the proportion of those planning to be "overweight" in UK stocks rising from less than 10% in July to over 30% this month. While the Swiss stock market also received a positive rating, sentiment towards Italian, French, and Spanish markets remained negative, with over 30% of investors indicating they would be "underweight" in German stocks. This marks a stark turnaround from 18 months ago when UK stocks were deemed the least favorable globally.