Investor confidence in UK shares continues to reach record high, but caution returns

After a strong year for UK shares, the Lloyds Bank Private Banking Investor Sentiment Index survey shows private investor confidence in UK shares asset class has remained high, but there has also been a small flight to safety away from Japan and Emerging Markets.
 
According to the monthly survey, the net sentiment among investors in UK equities increased to +40 at the start of the month, up 2% from January, with 48% of respondents holding a positive view and 8% holding a negative one. This is in sharp contrast to the start of the survey in March 2013, when the figure was +16, with only 34% positive view and 17% negative.
 
Commenting on the latest Investor Sentiment Index, Ashish Misra, Head of Investment Policy at Lloyds Bank Private Banking, said: “This is positive for UK investors as we see faith in the UK shares as well as other UK asset classes increasing. With Europe slowly edging out of the recession, positive UK GDP data and a strong domestic property investment, it is likely that investors’ view towards UK equities is reflective of this.
 
“Of interest this month is that there has been a tangible shift in investor preference away from riskier assets like equities and emerging markets towards perceived ‘safe haven’ asset classes like government debt and gold. Investor sentiment for next month will be quite intriguing, as we look to compare our data over the year since the survey began.”
 
Sentiment towards emerging market shares saw a decrease of 5% to +14 this month, possibly reflecting recent worries about Argentina and China, while Japanese equities saw their sharpest drop in net sentiment in the survey’s history, falling 10% from the previous month to +3.  However, gold and government bonds saw a rise in sentiment, up 8% and 1% respectively.
 
Investor sentiment towards Eurozone equities is still low at -23, which is down 2% from last month. However, this is a substantial improvement of the -59 in April 2013.
 
Ashish Misra concluded: “Overall, the results from this month suggest that aggregate net investor sentiment is stable, even marginally better and that investors are still looking for avenues to deploy their assets away from passive cash allocations. This implies a belief in the rewards that accrue to active investors, a belief in the falling cross correlation across asset classes – some asset classes perceived negatively, some positively – and a belief in the benefits of portfolio diversification; one of the central pillars of our investment philosophy.