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Is Brexit a winner for UK? not in the markets, at least, it would seem

for all of Prime Minister Boris Johnson's boosterish talk about the potential and prospects of post-Brexit Britain, UK equities trade at a stubborn discount to European and American stocks. As Oxford Economics pointed out last week, the British cyclically adjusted price-earnings ratio is at a decade low relative to other developed-country markets, and that discount is visible in almost every sector, from consumer to telecoms.


A Bank of America fund manager survey cited by Bloomberg last week showed a net 29 per cent of fund managers as underweight British stocks this quarter, an attitude that has prevailed ever since that fateful June day in 2016.


The Investment Association has calculated that a punter's return from a fund invested in only British companies would have totalled 13 per cent over the past four years, according to The Times, while a Europe-ex-UK fund would've delivered 39 per cent

Brexit isn't the only reason for a spot of bearishness about British equities.


Energy stocks comprise 12 per cent of the benchmark index, and they've been battered by the plunge in oil prices. Another big component is banks, whose margins have been crimped by falling interest rates.

There's also the unhappy prospect of many companies cutting dividends, especially galling because one of the attractions of British equities is traditionally the yield they offer.


And at a macro level, Britain's economy is on course for one of the world's steepest coronaviral recessions this year. The IMF said last week the British contraction would be 10.2 per cent, putting it in a double-digit club with only France, Italy, Spain and Mexico.




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