UK stocks prepare for a "Boris bounce"

UK stocks could be in line for a bounce if the election result reduces political uncertainty.

Jeremy Corbyn is still scaring investors, says Kate Palmer in The Sunday Times. "Billions of pounds have been pulled out of UK equity funds" in recent months as "investors panic" over a possible Labour government. Calm down, says Tom Stevenson in The Daily Telegraph. Currency, bond and equity markets barely moved on Labour's publication of its hard-left manifesto last week. So"either the City is pinker than it seems" or, more plausibly, it thinks there is little chance of him becoming the next prime minister. "The markets are telling us to relax."

UK stocks have been trading at an average 20% "political risk" discount compared to other markets ever since the 2016 referendum, says Tineke Frikkee in the Financial Times, but we could be in line for a bounce if the election reduces political uncertainty. Foreign buyers have already noticed that UK valuations are attractive. "Since mid-July, there has been roughly one bid for a UK-listed company every other week." Now "might be the moment to buy British".

There is "plenty of scope for upside" after 12 December, agrees Jeremy Warner in The Daily Telegraph. A majority for Boris Johnson would lift the Labour threat and "some of the pent-up consumer and investment demand held in check by the Brexit paralysis would come flowing back". Stocks would then "enjoy a rally based not just on sentiment but real economy prospects".

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