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Investor appetite for risk increases

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Private investors are feeling increasingly bullish about traditionally riskier asset classes, according to a new report by Lloyds TSB Private banking.

The bank’s latest Investor Sentiment Index found that in each of the last three months, sentiment towards UK, US and eurozone shares, as well as UK property, has increased.

Over three quarters of those surveyed said they had a positive or neutral view of the UK stock market over the next six months.

The report said that with FTSE 100 companies sourcing two-thirds of their earnings abroad, the UK stock market is an important barometer of the global economy.

Ashish Misra, head of investment policy at Lloyds TSB Private Banking, said: “The improved confidence towards traditionally riskier assets such as equities indicates that private investors surveyed are slowly developing a greater risk appetite. Global stock markets have had a mixed performance over the past few months, but investors are clearly responding to a steady stream of good economic news, such as rising house prices in the UK and strong housing and payrolls data from the US.

“We hold a more cautious view, particularly in regard to certain equity markets such as the US and UK, while still being broadly optimistic about medium-term stock market performance. Our view is that the best opportunities for equity investors currently lie in the eurozone and emerging markets, although performance of these cannot be guaranteed.

“The outlook for eurozone shares is improving due to gradually receding sovereign fiscal concerns, and a potentially more attractive risk-reward scenario is beginning to develop.

“Our view on emerging markets is based on their relatively superior growth dynamic as opposed to developed markets and some discounted prices which have been joined by an improving outlook for companies’ profits. We also think the recent out-performance by defensive markets like the UK and sectors such as healthcare is coming to an end, and this is reflected in our pro-emerging markets stance.”

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