Wall Street banks name UK stocks to benefit from a Labour Party win
The U.K.’s center-left Labour Party has won a substantial parliamentary majority in the country’s general election, unseating the incumbent Conservatives after 14 years. Analysts from investment banks have named stocks and indexes that are likely to benefit as the transfer of power happens in the U.K. FTSE 100 versus FTSE 250 Citi’s European equity strategist Beata Manthey said a new Labour government’s “policies are expected to be relatively business friendly.” Manthey and her team picked the FTSE 250 index , which can be traded through exchange-traded funds such as iShares FTSE 250 UCITS ETF or Vanguard FTSE 250 UCITS , over the large-cap index FTSE 100 , as their “preferred post-election trade.” The strategists, however, cautioned that historical data pointed toward lackluster returns immediately after the election results. “On a relative basis, the UK market has tended to underperform 1-2 months after Labour wins, while tallying decent relative performance 12m post-election,” they said in a note to clients after the results were confirmed. Swiss bank UBS echoed Citi’s call on the mid-cap index. More broadly, the investment bank’s economist Anna Titareva said U.K. markets remain “heavily discounted” since after Brexit. “Companies with UK sales exposure, the FTSE 250 index of small and midcaps, consumer oriented stocks and homebuilders specifically are all appealing investment opportunities in our view and few of the stocks in these lists have moved materially yet – perhaps unsure of the delivery and timing of the more supportive policies even though the trends are in place already,” Titareva said in a research note to clients Friday. .FTSE .FTMC 5Y line Housebuilders RBC Capital Markets’ analysts, led by Anthony Codling, believe the stock market has yet to fully price in the impact of the general election result leading up to the vote. “Labour had been significantly ahead in the polls since yesterday’s General Election was called, but we do not think that Labour’s proposed housing policies are reflected in the price of the shares,” they said. The investment bank named housebuilding giants Taylor Wimpey , Gleeson and Bellway as their “top picks” as the incoming government is expected to ease planning restrictions to enable a greater volume of homes to be built. Similarly, Jefferies analysts see the “political change as a major positive for UK Housebuilders.” After the election results were confirmed, they reiterated their stock preferences: Taylor Wimpey and Persimmon . Meanwhile, Investec, the Anglo-South African investment bank, named several companies in the housebuilding supply chain as net beneficiaries of the political change in the U.K. “We highlight the brick companies (Forterra, Ibstock and Michelmersh ) as having good exposure and positive leverage to more housebuilding, both private and social,” they said in a note to clients on July 5. “We also highlight that SIG , Genuit and Volution look well placed to benefit from the trends in sustainable building and likely increased spending on social housing.”
