The UK enters the third quarter of 2013 in robust form, according to the latest Celsius investment sentiment survey – a quarterly investment sentiment indicator produced by Financial Times Publishing.
In terms of regions, the UK reached its highest confidence level with advisers (at 78 on the index), enjoying the largest quarterly sentiment shift – a boost of 16 points. In terms of sectors, confidence in IMA UK Equity Income has surged ahead, rising by 10 points to an index reading of 89 and making it the most sought after sector, while IMA UK All Companies gained the largest quarterly sentiment shift (up 19 points to a Celsius reading of 83), making it second most favoured for the third quarter.
IMA UK Smaller Companies has benefited from an increase in adviser confidence since the first quarter of 2013, pushing it into fifth place and the most sought-after small-cap sector. The performance gap between UK blue-chips and UK small and mid-cap equities is at its widest in three years.
A valuation bias is likely to be the greater trigger in sentiment than the humble predictions for UK Plc, but the UK is also benefiting from fund flows away from emerging markets.
This quarter, the Celsius survey demonstrates continued souring of sentiment toward emerging markets both in terms of regions and IMA sectors. Since last quarter, IMA Emerging Markets dropped from joint-first to joint-fourth position in the Celsius index, while IMA Asia Pacific ex Japan slid from joint fourth to ninth position on the index. In terms of regions, for the first time Emerging Markets and Asia Pacific ex Japan were pushed out of the top-three regions advisers most plan to allocate funds to in the next quarter.
Looking at asset classes, the Celsius survey has indicated that advisers are shifting client allocations away from emerging market equities and plan to invest progressively more into developed markets (US, UK, Europe – and global).
The hunt for yield has – as forecast by previous Celsius reports – finally turned adviser attention back to property as an asset class. While residual painful associations with the asset class linger, multi-asset multi-managers have started to cautiously shift allocations from fixed income to property and in April (the latest data available), the IMA Property sector notched up £98m in net retail sales, more than triple the £33m in March.
Perhaps the most tumultuous market movement in the past quarter has been reserved for Japan, whose investors are accustomed to a rocky ride.
Since the last Celsius survey, during which Japanese equities were riding high on the market-friendly policies of new prime minister Shinzo Abe, its stockmarket entered a technical bear market. This has dampened adviser spirits though, as Japan reached its highest confidence levels on Celsius record this quarter, while advisers boosted IMA Japanese Smaller Companies with the second-largest positive sentiment shift since last quarter.
Anna Lawlor is a freelance journalist
