After a strong year for UK shares, a survey by Bank of Scotland Private Banking shows private investors’ confidence in the asset class has rallied after a fall in December.
Across the UK, data from the monthly Investor Sentiment Index, the net sentiment rose to +38 at the start of January (over 47% held a positive view and 9% held a negative view, while 31% held a neutral view).
This is in sharp contrast to the view from March 2013, when the figure was just over +16 (nearly 34% held a positive view and over 17% negative, while 38% held a neutral view). In Scotland, the mood is more cautious with a four point rise to just over +22 (37% held a positive view while 15% had a negative viewpoint) but this still demonstrates strong support for UK equities in Scotland.
During 2013 there were a number of positive news stories about the UK economy including improved economic indicators and company earnings. Despite periods of volatility, the FTSE 100 enjoyed a strong 2013, rising 14.4% in the best year for the index since 2009 - while the FTSE 250 of smaller companies closed the year at an all-time high. This has led to a largely positive outlook from investors towards UK equities.
Bank of Scotland Private Banking currently holds a positive view towards UK equities, with an overweight position in its client portfolios towards the asset class.
Investors surveyed also remain broadly negative towards Eurozone stock markets, with sentiment staying firmly in negative figures at -25; although this is a substantial improvement on a low of -71 in April 2013. Across global markets, Bank of Scotland Private Banking maintains a neutral stance towards US equities, but sees value in the Eurozone and Japan, holding an equity overweight position in both these markets.
However, Scots were less confident in the UK property market with confidence falling significantly behind the rest of the UK.
Net sentiment among surveyed investors towards UK property fell to +28 at the start of January (45% held a positive view and 17% held a negative view, while 31% held a neutral view). This is in sharp contrast to the overall UK figure which rose by 3% to almost +49 (with just over 57% holding a positive view compared to nearly 9% holding a negative view).
Commenting on the latest Investor Sentiment Index, Ashish Misra, Head of Investment Policy at Bank of Scotland Private Banking said: “It’s encouraging to see investors placing more faith in the UK stock market, and good news for British companies ahead of the first earnings season of 2014. There has been a slew of positive economic data out of the UK throughout 2013, suggesting that the recovery is gaining momentum, and it’s likely that investors’ views towards the UK stock market are reflective of this.
“The gap between Scottish investor sentiment towards UK property and the rest of the UK is perhaps reflective of the rate that property values are rising. South East England is certainly seeing prices rise faster than other parts of the UK so while Scots are seeing value in property, they are holding a view perhaps more in keeping with their local observations.
“Although US equities outperformed every other global equity market except Japan in 2013. We remain neutral towards the US and see the best opportunities for equity investors currently in the UK, Japan and the Eurozone.”
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