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Investors exit UK stock markets

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Investors continued to shun the UK as Brexit fears weighed, according to the latest statistics from the Investment Association.

The trade body’s monthly statistics for January 2018 showed positive inflows into the three main asset classes. In spite of worries over rising interest rates, Fixed Income led the way with a £1.6bn net inflow from retail investors.

The ‘Global’ sector was the best-selling equity sector with net retail sales of £675m, followed closely by Asia. However, the UK saw net outflows of £532m over the month continuing its recent run of unpopularity.

Adrian Lowcock, investment director at Architas, said: “Investors aversion to the UK continues, and doesn’t look set to change anytime soon as we can expect more uncertainty as Brexit negotiations intensify over the coming months. At the same time investors have recognised the areas of the markets which look attractively valued with Japanese, European and Asian equities all in favour among investors. The US continues to see mild inflows but given the size of its market this suggests investors are going underweight the region. The tax reforms announced at the end of last year haven’t convinced investors here that the US can continue to grow and therefore offers some value.”

Lowcock said the continued popularity of fixed income was surprising given the headwinds for the sector. He added: “The sell-off in the bond market came towards the end of January and, after a period of benign market conditions, it came out of the blue to surprise investors so is unlikely to have impacted demand for the sector in January. It will be interesting to see what the effect will be on investors’ behaviour in February.”

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “The antipathy towards the UK is now so long in the tooth one has to question whether sentiment is truly reflecting prospects for the UK stock market compared to its global peers. The UK fund sectors are home to many talented managers and UK companies have diversified international income streams, so investors should make sure they’re not just following the herd if they’re thinking about ditching their UK holdings, and have considered reasons for doing so.”

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