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JPM: UK shares to underperform Eurozone, maintain neutral stance

Stock MarketsMay 18, 2021 09:59
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© Reuters.

By Samuel Indyk

Investing.com – In a recent research note, analysts at JPMorgan (NYSE:JPM) Cazenove said they do not expect UK equities to outperform their Eurozone counterparts, although they did note that the UK “appears cheap”.

Throughout the first quarter, many traders and institutional investors were calling for UK shares to outperform, mainly on the reopening trade as the vaccination effort meant the UK could ease COVID restrictions more quickly than their Eurozone peers.

JPM still thinks this is a positive for UK stocks but expects shares to underperform Eurozone peers.

“We believe Overweight Eurozone vs UK continues to make more sense,” JPMorgan strategists Mislav Matejka, Prabhav Bhadani and Nitya Saldanha said.

The strategists said the UK is unlikely to outperform Eurozone on the backdrop of rising yields and as the UK does not trade as a ‘value’ market, noting that the UK has underperformed in all the past ‘value’ rallies.

GBP is also trading relatively firm, which helps common currency returns, but UK equities in local currency tend to trade inversely with FX.

“We believe UK risk-reward is better than it was for a long time, and that the FTSE 100 will keep moving higher on a 6-12 month horizon, but likewise think that, while not an Underweight anymore, the UK will perform as a Neutral in the European portfolio, exactly as it is doing so far year-to-date,” Matejka, Bhadani and Saldanha said.

Within the UK, JPM favours FTSE 250 vs FTSE 100, domestic vs exporters, especially homebuilders, and consumer reopening names.

Within domestics, JPM has a preference for Telecoms, which were double upgraded to Overweight in January.

Stocks in JPM’s UK reopening basket include Diageo (LON:DGE), Carnival (LON:CCL), Associated British Foods (LON:ABF), WPP (LON:WPP), Next (LON:NXT), IAG (LON:ICAG), Rolls-Royce (LON:RR), and Melrose Industries (LON:MRON).  

JPM: UK shares to underperform Eurozone, maintain neutral stance
 

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Comments (6)
Aynalem Aynalem
Aynalem Aynalem May 18, 2021 14:52
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name Aynalem liven Lebanon
Aynalem Aynalem
Aynalem Aynalem May 18, 2021 14:51
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0096170432601
Bhoralal Bhai
Bhoralal Bhai May 18, 2021 11:36
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Bhoralal Bhai
Bhoralal Bhai May 18, 2021 11:36
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BHURALAL
Martin Wall
Martin Wall May 18, 2021 11:19
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The UK will outperform the European stocks then
Vu Francis
Vu Francis May 18, 2021 10:29
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next please
 
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