The UK represents a compelling investment opportunity despite the ongoing political and economic uncertainty, according to private bank, Kleinwort Hambros.
Mo Choukeir, CIO at Kleinwort Hambros, the UK division of Société Générale Group, has spoken of the strong potential upside of taking a contrarian view to investment and seeing past negative sentiment.
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This is a view that has been shared by other major wealth managers amidst the current climate.
“This is not financial advice,” Choukeir says, “but if you want to invest in a market that is unloved, so sentiment is negative, where valuations are compelling, and momentum is positive – you invest in the UK.”
Choukeir acknowledges that this is a difficult position to reconcile owing to the Brexit cloud, but draws comparison with the Eurozone crisis of 2012, which, he suggests, was far more severe.
“The Eurozone was about to collapse. This was not one country coming out of trading bloc – this was the end of a currency union.”
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By GlobalDataSimilar to UK equities today, European equities were cheap and unloved, and were also enjoying positive momentum thanks to the ECB’s “whatever it takes” approach.
UK investment sentiment
“It comes with risks, of course,” Choukeir continues, “because there’s the political risk and the volatility that comes with that.
“But that’s a market where actually we think it’s good to have a contrarian position.”
This is part of overarching strategy to go against the grain, and avoid investments that are over-hyped and therefore poorly valued, while taking advantage of those suffering from negative sentiment which are undervalued.
Choukeir adds: “Do you put all your investments there? No, you diversify, you put some in bonds – investment grade bonds as well as government bonds – and
other global assets.
“But the UK does look more compelling than some other markets.”
UK sentiment may not in fact be as negative as expected. UBS’ 2019 Investor Sentiment Survey found that a plurality of high-net-worth investors and business owners believe that Brexit would have a positive impact on the economy, while fewer were concerned about political uncertainty than had been the case a year previously.
