Share

Scotland's vote worries chase investors out

London - Uncertainty surrounding the outcome of the Scottish independence referendum this week has sent investors in British assets heading for the exits, a closely watched survey showed on Tuesday.

According to Bank of America Merrill Lynch, which polled 202 fund managers controlling assets of $556bn between September 5 to September 11, the UK was among investors' least-loved market in September.

"As opinion polls indicated the referendum for Scottish independence was too close to call, negativity towards UK stocks deepened. The UK has entrenched its status as the world's least popular region among asset allocators this month," BofA said.

A net 16% of respondents are underweight in UK equities, and 14% named it as the region they most want to underweight in the coming 12 months.

A fifth of the panel said the UK has the least favourable profit outlook, up from 12% a month earlier.

The findings echo data from London-based consultancy CrossBorder Capital published earlier this month. That showed investors pulled $27bn out of UK financial assets in August - the biggest capital outflow since the Lehman crisis in 2008.

Manish Kabra, European investment strategist at BofA, said outflows from UK assets had picked up in the last four weeks as the vote approaches. But he said the Scottish referendum had served to accelerate a trend that had already begun during the summer.

The UK was already out of favour because investors were seeing growth opportunities in the global economy and the British stock market is stacked with defensive companies such as Unilever.

The survey also found, however, that gathering signs of a slowdown in China have helped push global growth and profit expectations down to 12-month lows.

"As we see growth expectations come down, we could see the UK picking up again," Kabra said.

The global survey found investors' cash holdings have dropped as more money was deployed to riskier assets. But at 4.6%, compared with 5.1% a month earlier, they remain high by historic standards.

Meanwhile, sentiment towards European assets is on the rise as the European Central Bank loosens policy, in an effort to stimulate its sluggish economy.

This has pushed more money into European stocks. A net 18% of respondents are overweight in the region, up from 13% in August. A net 11% highlight Europe as the region they most want to overweight in the next 12 month, the survey said.

However, more than a fifth of investors called deflation in the eurozone as "the biggest tail risk".

Nearly half of investors expect a US Federal Reserve interest rate hike in the second quarter of 2015, up from 38%, so the proportion saying the US dollar will strengthen against the euro and yen stands at 86%.

The biggest worry, cited by 39%, is geopolitical tension, as relations with Russia worsen.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Voting Booth
Do you think corruption-accused National Assembly Speaker Nosiviwe Mapisa-Nqakula will survive a motion of no confidence against her?
Please select an option Oops! Something went wrong, please try again later.
Results
No, her days are numbered
40% - 99 votes
Yes, the ANC caucus will protect her
60% - 151 votes
Vote
Rand - Dollar
19.06
-0.8%
Rand - Pound
24.04
-0.6%
Rand - Euro
20.55
-0.4%
Rand - Aus dollar
12.37
-0.2%
Rand - Yen
0.13
-0.8%
Platinum
901.20
+0.5%
Palladium
997.97
-0.4%
Gold
2,200.01
+0.2%
Silver
24.52
-0.5%
Brent Crude
86.09
-0.2%
Top 40
68,001
+0.5%
All Share
74,204
+0.4%
Resource 10
56,476
+1.5%
Industrial 25
103,644
+0.4%
Financial 15
16,491
-0.2%
All JSE data delayed by at least 15 minutes Iress logo
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE