UK recovery takes hold – Nov 2013
UK equities performed strongly over October as a whole, although investors experienced a certain amount of daily volatility during the first half of the month as the US struggled to resolve its fiscal problems. In general, larger UK companies performed better than their smaller counterparts over October – the FTSE 100 index rose 4.2% during the month while the FTSE 250 and FTSE Small Cap indices both enjoyed increases of 3.8%.
Although some significant challenges remain, the UK’s economic recovery continues to gain traction. Employment in the services sector reached its highest level since 2007, according to the British Chambers of Commerce. Furthermore, business confidence in turnover and profitability has returned to pre-recession levels and the manufacturing sector is showing significant signs of improvement.
The Confederation of British Industry did report a slowdown in retail sales during October, which were dampened by disappointing sales at supermarkets. Nevertheless, many retailers are expecting sales to rebound during November – orders appeared stable during October and were tipped to rise in November. For its part, supermarket retailer Tesco announced a 23.5% decline in first-half profits, citing a challenging retail environment.
The flotation of Royal Mail took place during October. Amid high demand for shares – almost 700,000 private investors applied for an allocation and the retail offer was oversubscribed by seven times – private investors ultimately received 227 shares each. Shares in Royal Mail were initially priced at 330p each, valuing the company at £3.3bn and the share price soared by 38% on the first day of dealings.
According to the latest data from the Investment Management Association, equities remained the best-selling asset class for a sixth consecutive month during September. During the third quarter of 2013, equity funds experienced their strongest sales since the second quarter of 2000. At a regional level, UK equity funds were the best sellers during September, and UK Equity Income was the best-selling fund grouping.
Sales of UK All Companies funds halved in September compared with August, but were still very healthy. In comparison, sales of funds in the UK Smaller Companies sector beat those of mainstream UK equity funds. 2013 is now expected to be a record year for net inflows into the investment company sector, according to the Association of Investment Companies.
Until the next time Paul Hoskin @HoskinFinancial