Money supply profitability and buying English stocks are worth

The author analyzed the prospects of the UK property market in the last period, and there is no reason to ignore the UK stock market

In the past, investors were not interested in the UK stock market. In addition to the relatively high transaction fees, the lack of local technology stocks also made the UK stock market less attractive. Coupled with the uncertainty of the Brexit political situation, the performance of British stocks in recent years is behind the other indexes.

shows the performance of the major indexes of the Brexit referendum on June 23, 2016

The cumulative increase of the FTSE 100 index is only 13%, and the last one in the mainstream index. However, Li Ka-shing, the richest man in Hong Kong, earlier acquired the local catering brand under the uncertainty of the political situation and implemented the value investment law of “greed when others fear", which caused some investors to pay attention to the prospects of the British stock market. Should investors follow the pace of Hong Kong’s richest man to enter the UK stock market?

From a valuation perspective, the current P/E ratio of P/E is 17 times, which is 25 times lower than the average after the financial tsunami. The valuation seems attractive, but during 2010-2014, the P/E ratio of the FTSE 100 index is 10 Up to 20 times between the ups and downs, whether the current valuation is attractive or reasonable may be just a matter of opinion and perspective.

However, for value investors, the most important thing is that earnings growth can drive up valuations. From the perspective of leading indicators, the profits of British companies do show signs of stabilization. [Figure 2] Comparing the UK’s leading indicators compiled by the Organisation for Economic Co-operation and Development (OECD) and the FTSE 100 index’s earnings per share year-on-year, both tend to move in the same direction. The former leads the latter for about two quarters, and the results show that corporate profits There are signs of stabilization.

FTSE index 6540 point stop loss

Similar results were obtained from the perspective of money supply. [Figure 3] Comparing the year-on-year changes in the UK’s broad money supply M4 and FTSE 100 earnings per share, the two have been closely related since the financial tsunami, with a correlation coefficient of more than 0.8. The former leads the latter for about one year, and the results also show earnings growth. The opportunity to see a rebound will have a positive impact on the stock price.

In summary, although the UK stock market has been affected by political uncertainty in recent years, and the lack of technology stocks listed, the performance of British stocks is lagging behind other mainstream countries, but leading indicators and money supply show that corporate earnings will bottom out, so investment Those who are considering the pace of following the richest man Li Ka-shing can pay attention to the investment opportunities of the British stocks. As for the short-term, [Figure 4] compares the ratio of the FTSE 100 index stocks above 200 antennas and the year-on-year change of the index. The former leads the latter for about 4 months. The results show that the FTSE 100 index was generally stable before the end of the year. Therefore, if investors are interested in entering the market, they can make a stop loss at the low level of 6540 last year, and wait for the index to be adjusted.


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