British stocks: the ultimate contrarian opportunity?

No one wants them at the moment, largely because of Brexit fears. Does that make them a certain buy, asks Laura Suter

Professional fund managers have their lowest exposure to British shares in years, private investors have sold more than £7bn of UK funds, the London stock market has fallen with all the others and Brexit is casting a long, uncertain shadow over the market. Does all this make shares in British companies the ultimate contrarian bet?

The FTSE 100 index of leading UK stocks has fallen by 6.8pc since this year’s peak in mid-January.

Some argue the sell-off was the minor correction that the market needed after a bull run that had lasted almost five years ( see Fund of the Week, page 9), while others see it as the start of a more prolonged decline. How should DIY investors interpret all these signals? And should they pile more money into Londonlisted shares?

A survey of professional ofessional fund managers carried ied out by Bank of America Merrill ill Lynch found that most were pessimistic simistic about Britain’s fortunes.

The UK is the he “consensus short” ort” among fund managers, the survey said. d.

Managers are re now as pessimistic about Britain as they y were during the global bal financial crisis: s: the number of f managers with ha a lower percentage age of their money y

After a long bull run, could investors really grab some bargains? Selectively, says Matthew Jennings of Fidelity, the asset manager. “On a stand-alone basis you could not really argue that the UK is very cheap compared with historical levels. The valuation is close to or a bit above long-term averages, averages,” he said. “I’m not banging the ta table saying UK shares are incredibly cheap and investors should be flood flooding into them. But on a relative ba basis the arguments are very per persuasive – there are pret pretty clear signs that the British mark market is unloved amon among global asset a allocators.” How However, profess professional UK investor investors say the market ca cannot be