The rally is over and UK stock is still undervalued, says British wealth manager

The UK stock market is overvalued according to some analysts, and tech stocks could be more volatile in future as the FAANG stranglehold gets diluted by free thinkers

China Stock exchange

It was inevitable that the last week’s worth of trading on the UK stock market would have had its run of volatility once the tabloid newspapers had finished spouting their hyperbole about a supposed ‘vaccine’ for a supposed virus which is being used as a tool by European governments to hold citizens hostage in their own homes, which won’t be their own homes for much longer if these economic incompetents carry on as they are.

News trading is exactly that – currency and equities traders maximizing the opportunities presented by volatile market movements which are caused by kneejerk reactions to news broadcasts. By no means does trading the news mean that the news articles prove to be in any way correct, hence the market euphoria relating to several large pharmaceutical companies last week having claimed that they will be launching a vaccination which governments will buy en masse and potentially insist that their populations are subjected to, has died down along with these stories.

Today, it is evident that many experts in London have taken a pragmatic and sensible view, looking at the multi-asset trading environment through a very conservative lens.

One factor is that people’s behaviour has changed dramatically, and many countries have suffered severe social and financial shocks, however according to executives in London, the UK is among the developed markets which remains cheap, and it is being heavily tipped.

According to Rob Morgan, investment analyst at Charles Stanley Direct, investors continue to view the UK stock market with scepticism. This morning he told mainstream news sources that compounding the Covid-19 fallout, uncertainty surrounding Brexit fallout persists, weighing on share prices most notably in respect of smaller, more domestically orientated companies, and therefore there is value to be found for experienced stock pickers that can hopefully pick out the best of the opportunities.

Darius McDermott, Managing Director of FundCalibre’s view is that the UK stock market remains unloved, under-owned and under-valued even after the ‘vaccine rally’. He puts this down to ongoing Brexit uncertainty and its make-up – oil and bank heavy and light on tech.

‘Overseas companies are starting to take advantage of cheap stock prices by making cheeky bids for UK plc at rock-bottom prices,’ he notes.

Indeed, the energy sector is certainly a source of volatility, largely down to the lack of future of one of the world’s most constantly valuable commodities, that being crude oil. With demand for stock in battery companies as they advance their technology via research and development investment in order to establish methods of making batteries last longer – the single most important hurdle to overcome in order to make electric modes of transport more viable – many City analysts are beginning to consider oil to have no future at all as a valuable commodity.

Of course, it is a plentiful resource that is always extractable, but its value long term will face decline if electric power replaces it in transport the way it has done in the energy industry for domestic housing in Western nations.

Unlike in the energy sector, where oil prices moved sharply lower during the past few months, metals and other mined commodities have proved relatively resilient so far this year” said Matthew Roche, Associate Investment Director at Killik & Co. “We believe this sector will play an important role in the global energy transition (demand for batteries, network infrastructure) which is clearly now accelerating beyond previous expectations – yet sector valuations have derated relative to the broader market” he concluded.

With regard to UK stocks, Teodor Dilov, fund analyst at Interactive Investor, said “From a geographical perspective, UK equities have been underappreciated by the market for a while, however, this could be an excellent entry point for contrarian investors to buy high quality businesses at a discount and start building long-term positions in companies with diversified revenue streams and strong management profiles.”

Japanese stocks are on the radar of many UK wealth managers, some of which are managed at a fee of over 1.1% which is relatively high, but confidence in the Japanese market is high due to its stability, having not been affected by endless lockdowns and media hyperbole.

Those brave enough to go for technology company stocks may consider that there are many internet giants that have done well due to the home working and e-commerce dynamics that have resulted from the draconian stance of many Western governments since March, however with the big internet firms beginning to censor anti-lockdown sentiment and ban individuals from sites for merely stating their views, many large customers have been alienated and are looking to the smaller firms for their hosting and services.

Yes, the big publicly listed giants that even have an acronym for their collective stocks – FAANG – may well be the dominant ones now, but their internet dictatorship which extends to attempting a currency coup as well as censorship does not bode well with the sensible, free market orientated investor, hence there may be alternatives on the horizon with higher appreciating share values.

Read this next

Institutional FX

ATFX uses blockchain to help clients verify IBs and vice versa

ATFX said it has been working on the IB verification project for a few months.

Industry News

Research market in dire straits as SEC’s ‘no-action’ letter on MiFID II lapses in June – survey

“Of all the regulatory news that has hit the research market in the last few months, this is the one change that will fundamentally impact what fund managers can access and pay for in future.”

Executive Moves

Wombat appoints ex-abrdn Richard Charnock as UK platform turns to Europe

Launched in 2019, Wombat provides a dedicated mobile investing platform – available on both iOS and Android – offering users both range and choice.

Institutional FX

Broadridge integrates Point Focal’s pre and post-market reports

“Point Focal provides a unique lens on the market which will help add alpha to the trading process and these new insights will rapidly improve performance while mitigating execution risk and simplify trading.”


XCritical integrates with Brokeree Solutions, allowing its clients to launch copy trading 

The forex software provider – XCritical, has integrated Social Trading by Brokeree Solutions into their CRM system.

Industry News

HKEX partners with Saudi exchange for cross listings, ESG, Fintech

“The Kingdom of Saudi Arabia, and the broader Middle Eastern region, are one of the world’s most dynamic and exciting economic and innovation hubs and also home to some of the fastest growing investor groups in the world. Hong Kong and HKEX’s markets offer significant opportunities for international investors and corporates, including unrivalled connectivity to the Mainland Chinese markets through our unique Connect programmes. This agreement signals the beginning of even greater collaboration between our companies and our home markets, and we look forward to exploring many future areas of cooperation.”

Executive Moves

CMC Markets Connect relocates APAC team led by Peter Foster to Singapore

“Singapore is a vibrant city and is now undoubtedly seen as Asia’s leading financial hub. The decision to bolster the CMC Markets Connect team here will help us cement the company’s position as a leading provider of multi asset liquidity and comprehensive trading solutions across the region.”

Retail FX

Italian watchdog red flags Olympus Brokers, UnicoFX and Allfina Group

Italy’s Commissione Nazionale per le Società e la Borsa (CONSOB) has shut down new websites in an ongoing clampdown against firms it accuses of illegally promoting investment products in the country.

Retail FX

XTB revenues hits zł1.45 billion in 2022, Q4 earnings disappoint

Poland-based Forex and CFDs broker, XTB has reported its final results for Q4 of 2022 and the full fiscal year ending on December 31, 2022, showing one of its most successful corporate years.