A FRENCH banking giant has told clients to move cash out of the eurozone and back Britain in a valuable boost for the City.
Investment bank BNP Paribas urged clients to move their money into British stocks.
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BNP Paribas has told investors to pump their money into companies listed on the UK stock exchange Credit: Reuters
The UK is seen as an attractive investment due to a cheap pound, its combination of sectors and a better-than-expected performance of the British economy, the Telegraph reports.
Analysts at the bank have switched their preferred allocation from the eurozone to the UK, encouraging investors following their advice to pump their money into companies listed on the UK stock exchange.
The move is expected to deliver a much-needed boost to the under-pressure London stock market which has been gripped by fears of losing its position and clout due to an exodus of listed companies.
The bank’s head of credit research Viktor Hjort said: “The outlook for UK equities is not bad at all. The FTSE is a value market. It has lots of energy and materials and a lot of banks. You can look at the oil price to see where energy is going.”
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Since late June, oil prices have risen by around a quarter and reached a 10-month high this week due to a squeeze on supply by Saudi Arabia and Russia to counteract reduced demand.
The rising prices will give a boost to both BP and Shell, who combined, account for around 13 per cent of the FTSE 100’s value.
Interest rates have also risen at their fastest rate since the 1980s, giving a boost to banks’ profit margins.
Financial stocks make up nearly a fifth of the value of the FTSE 100.
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Hjort said: “We think this kind of environment is quite favourable to value investing in general as opposed to growth. The UK is a pretty good example of that.”
Also counting in Britain’s favour is that “valuations are just cheaper,” Hjort said.
Earlier this summer, investment bankers JP Morgan said British-listed companies were the cheapest in the world because of “very gloomy” sentiment towards the UK.
Forecasts predict the UK economy will fare better than the eurozone.
Economists at BNP Paribas expect the UK to fall into a mild recession in the first half of next year but think the economy has shown to be far more resilient than expected.
Meanwhile the experts think the eurozone will face the prospect of a double-dip recession after quarterly growth figures were revised down last week.
BNP’s chief European economist, Paul Hollingsworth, said there had been “a lot of pessimism” about the UK, especially after Liz Truss’s premiership.
He said: “There was a lot of caution about UK assets. Things have moved on since then. As we saw, the economy did perform a lot better than people expected.
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“When we speak to people they agree that there is some weakness ahead but it’s not going to be a severe downturn, partly because some of that underlying resilience is there.”
BNP Paribas is one of Europe’s largest banks, with assets of more than ￡2.1trillion.
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BNP Paribas has urged its investors to move their money out of companies in the eurozone Credit: Getty