British investors lack confidence in the economy and have been dumping stocks from their home market — even as US investors have been buying UK stocks, according to Liberum Capital Ltd.
UK equity funds moved $13 billion into US stocks in the year through June, while Americans bought London-listed stocks worth $21.8 billion in the same period, strategists Joachim Klement and Susana Cruz said in a note to clients. They cited data compiled by Bloomberg that’s sourced from the US Department of Commerce.
“It seems the lack of faith of British investors in their own economy is a key driver of relative weakness of UK stock markets,” the strategists said, noting that foreign funds are more likely to buy internationally-exposed equities. The flows help account for the underperformance of the domestically-focused FTSE 250 index, which has fallen 2.0% over the past 12 months, compared with the internationally-focused FTSE 100, up 2.8%, even as the pound has strengthened against the dollar. Foreign investors tend to buy shares in bigger firms with international earnings, instead of lesser-known domestic earners, Liberum said.
UK indexes have also underperformed against European and US benchmarks over the past year. The country has increasingly been seen as an outlier in the global quest to get inflation under control, while Britons are dealing with soaring mortgage rates and a cost-of-living crisis. Strategists at Barclays Plc this week described Britain as “the most unloved” major equity region, citing outflows from UK stocks as a percentage of funds’ assets under management. London’s stock market, meanwhile, has lost several of its top companies over the past few years.
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