Staff of Reuters Read for 2 minutes (Reuters) – LONDON, June 30 (Reuters) – According to BofA, additional inflows into British stocks, bonds, and the pound are predicted in the coming quarters, with the country’s net portfolio balance posting a 120-billion-pound inflow in the first quarter, the largest since 2008. According to data analyzed by BofA, there was high offshore demand for UK fixed income assets, while local investors sold foreign stocks, indicating greater investor appetite for UK assets at home. In the first quarter, the UK’s current account deficit shrank to 12.83 billion pounds ($17.8 billion). Brexit aftershocks and their influence on the trade balance, according to BofA, have thrown the balance off, but the imbalance should start to shrink in the second half of the year. The rapid distribution of the COVID-19 vaccine in the first months of 2021 piqued the interest of investors who had mainly avoided UK stocks since the 2016 referendum, anticipating that Britain would recover faster than its European peers. As a result, according to BofA’s monthly survey of fund managers, overseas investors now have the largest British “overweight” – their UK share holdings relative to Britain’s size in global stock benchmarks – in seven years. Though some of the luster surrounding British assets has faded due to concerns that a rise of coronavirus cases in the United Kingdom and Europe will cloud the outlook for a quick economic rebound in the coming months, investors remain optimistic. “Our lead indicators imply investor appetite for UK assets remains strong: the UK continues to draw substantial cross-border M&A activity, while the latest data on foreign gilt purchases reflects sustained demand,” the bank’s strategists wrote in a note on Wednesday. “Over the next few quarters, the trend appears to be favorable, which should assist the GBP,” BofA noted. Sterling is on track to gain for the fourth quarter in a row, the longest winning streak since 2017. Saikat Chatterjee contributed reporting, while Thyagaraju Adinarayan and Alison Williams edited the piece./n
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