Page 8 - DIY Magazine March 2018

FINANCIALS
Valuations remain high but could go higher; the sector is reliant on the global economic rebound
Tetragon sees valuations in financials as high and in some cases overly stretched, but still with opportunity for further prices rises; Robert Kyprianou of Polar Capital Global Financials notes that sentiment towards the sector has become more balanced and constructive, but memories of the 2007-08 financial crisis are long and the sector continues to carry a legacy risk premium. Looking forward, regulatory and technological changes will lead to profound changes
to the sector but the main drivers remain the outlook for economic growth and interest rates.
INFRASTRUCTURE
Underperformance of this defensive sector is ‘unsurprising’ and has exposed investment opportunities
Premier Global Infrastructure noted that the sector underperformed wider equity markets in 2017; Global equity markets continued to set new highs, and it is perhaps unsurprising that a defensive asset class such as infrastructure, and especially the utility segment, should lag. Its managers are optimistic for prospects
in 2018 and continue to see increased earnings, particularly in many of the emerging markets, which trade at modest valuation levels.
The relatively weak performance of listed infrastructure companies has created an investment opportunity in the medium to long term.; regulated utilities can benefit from anticipated higher global interest rates.
PROPERTY
Growth in the UK and London has slowed but less than expected; Brexit is a concern for overseas asset management
Derwent London says growth in London and the UK has slowed since the EU referendum result but, overall, the outcome has been better than initially expected. Markets expect low levels of UK GDP growth, as Brexit and political uncertainty continue to weigh on business decisions and more interest rates rises are expected as the economy recovers. Vikram Lall of F&C UK Real Estate sounds a cautious note and adds the uncertainty over Brexit and international trading as concerns. However, AEW Long Lease REIT is cautiously optimistic on the outlook for long lease property in the UK, particularly relative to the yields on UK government bonds; rising interest rates may close this differential.
TECHNOLOGY
The outlook for Technology remains positive, as companies need to increase their spending
Katie Potts of Herald Investment Trust can see strong growth in technology companies in the UK and in particular in London. Despite headwinds from global equity markets, Robert Jeens of Allianz Technology reasserts that technology should continue to grow its influence over the global economy, driven by the need for companies to upgrade and invest in IT infrastructure. The case for strong relative performance from the technology sector remains robust.
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DIY Investor Magazine | Mar 2018 8