UK companies are cheapest in the world because of ‘gloomy’ view of Britain, says Morgan Stanley
British stocks have also been the worst performers in Europe so far this year in a further blow to efforts to attract investment. A relative lack of technology companies has left the British market lagging behind rivals as the sector has rallied globally.
Morgan Stanley’s analysis will fuel already acute fears about London losing its competitiveness.
Influential fund manager Nick Train, the co-founder of investment firm Lindsell Train, called the Britain market a “back water” earlier this year and mining giant WE Soda criticised “extreme investor caution in London” when it scrapped plans to list there last month.
The government has made boosting the British market a key priority and Jeremy Hunt will on Tuesday announce new plans to encourage pension funds to back UK companies.
Despite widespread pessimism about UK assets, Mr Secker said: “It’s worth noting that actual economic trends have been more optimistic.
“There is potential for this narrative to shift quite meaningfully over the next few months if inflation starts to drop as suggested by input and output price components.”
If inflation started to fall rapidly, investors could be attracted to cheap British assets, he said. The Wall Street giant said the most attractive UK stocks included BAE Systems, Ashtead, 3i, BP, Smith & Nephew, Haleon, Prudential, Rio Tinto, AstraZeneca, Invidior, Segro and SSE.
Morgan Stanley expects inflation to fall considerably in the second half of this year.
