U.K. investors have started plowing billions of dollars into U.S. stocks, while continuing to pull their money out of British equities, in another sign of the troubles faced by the U.K.’s stock market which is continuing to suffer from a lack of liquidity, low valuations, and a scarcity of IPOs.
British investors have plowed billions into U.S. stocks since October last year, seeking to capitalize on the tech-fueled stock-market rally that has seen America’s top stock indexes increase by a fifth over the past five months, new research from Calastone shows.
Those investors have at the same time continued pulling their money out of British stocks, withdrawing £633 million from U.K. focused equity funds in February alone, even as British inflows into global equity markets have surged to their highest levels in years.
The withdrawals from U.K. equities are in line with long-running trends that have seen British investors pull billions out of U.K. stocks in recent years, as the London Stock Exchange has suffered from comparatively low valuations compared to those on U.S. markets.
The troubles faced by the U.K.’s main bourse have seen a raft of top companies either switch their listings away from London or instead avoid the LSE entirely.
Instead, British investors have started piling into U.S. stocks, in a turnaround that has seen them plow £6.31 billion into equity funds since November during a five-month surge that has seen inflows increase month-on-month as investors have bought into the recent rally.
In February alone, British investors plowed a record £2.54 billion into North American equity funds, including £1.88 billion into American ESG funds, in which the world’s top performing technology stocks are heavily represented.
The inflows into U.S. stocks, paired with £363 million worth of inflows into European equities -– which was almost entirely driven by investments in European ESG funds -– saw inflows from British investors hit their highest levels since May 2021.
The recent surge of inflows into U.S. stock markets marks a major reversal of prior trends that previously saw British investors pull £8.06 billion out of equity funds in the 18 months ending in October 2023.
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