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London market a bargain as pension funds stop selling, says HSBC

Published 21/05/2024, 11:48
© Reuters.  London market a bargain as pension funds stop selling, says HSBC
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Proactive Investors - A second City investment has said now is the time to buy UK shares as pension funds have “nothing left to sell”.

According to analysts at HSBC (LON:HSBA): “The long-term structural overhang of UK pension fund selling is at an end” and now represents a “golden opportunity” to buy.

In fact, the bank now expects the selling trend to reverse due to political pressure and for money to start to move back into UK equities.

Holdings of UK funds by pension funds have dropped from 53% in 1997 to around 4% currently and the bank said this percentage is now so small that any further sales would hardly make a difference.

In total, HSBC estimates that pension funds have sold almost £2 trillion of assets over that period.

HSBC became more bullish on the UK market last year when it moved its investment view from 'underweight' to 'neutral', with this now upgraded again to 'overweight'.

The bank’s forecast of where Footsie will end the year has also been increased to 8,750 from 8,100.

Even if Labour wins the next election HSBC is bullish it says as this would remove uncertainty for potential roadblock investors in the UK.

HSBC calculates the discount of London to the US stock market is currently 23% wider than normal.

Last week another City broker, Panmure Gordon, said “UK valuations remain deeply subdued compared to their historic norms both on a relative and absolute basis,” with discounts only narrowing slightly to 17% from 19%.

The opportunity is "real, broad-based across all sectors and amplifies at the mid and small-cap level", said the broker.

“The opportunity for investors [in the UK] continues to hide in plain sight”, Panmure Gordon concluded.

Read more on Proactive Investors UK

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