UK quoted stocks just ain’t got the appeal they used to, according to a report — Ownership of UK Quoted Shares 2020 — published today by the Office for National Statistics. It was quite an eye-opener and arguably reflects not just some key trends playing out within markets generally but a broader shift in the mindset of UK investors.
The key takeaways from the report were that the proportion of UK shares held by UK-resident individuals in 2020 fell to 12%, down by 1.3 percentage points from 2018. Meanwhile, unit trusts' proportion of UK quoted shares fell to 7.4%, down 2.0 percentage points from 2018. In stark contrast, the proportion of UK quoted shares held by investors in the rest of the world increased to a record high, at 56.3% of the value of the UK stock market. Translated: we’re exiting stage left, as overseas investors enter right.
Antonia Medlicott, finance editor at the financial comparison website, InvestingReviews.co.uk, said this of the report: “On this evidence, UK shares are far more popular with investors and financial institutions based outside the UK than they are with those based in it. UK-resident investors appear to increasingly be looking global in their search for returns rather than in their domestic market. Globalisation is now embedded in UK investors’ DNA. This may well be because a lot of the world’s leading tech, automotive and social media stocks, such as Tesla, Apple and Meta, are based overseas and their appeal is almost magnetic for a growing number of UK investors.”
Scott Gallacher, a chartered financial planner at Leicestershire-based independent financial advisers, Rowley Turton, was phlegmatic about the findings: “I'm not surprised by this data at all. The UK stock market has disappointed for several years, partly due to Brexit concerns but also because it includes more 'value' stocks, which have also disappointed. Consequently, many investors eventually lost faith and switched their UK investments into other markets and 'growth' stocks in particular. Of course, it’s Sod's Law that, with many investors having switched out of the UK, the UK stock market was actually one of the best-performing markets last year. In part, this was because Brexit wasn't as bad as many feared, but it was also due to the fact investors started to recognise that 'value' stocks were probably undervalued and started rebuying them.”
Joshua Gerstler, chartered financial planner at Borehamwood-based The Orchard Practice, was also pragmatic in his verdict, suggesting the data was understandable as investors increasingly seek to diversify: “When we help clients to invest in shares, the focus is not solely on UK companies as a global portfolio is more diversified by default. Conversely, investors overseas are clearly doing the same and are now including UK shares as part of their portfolios.”
And let’s not forget that 2020 was the year when the pandemic took hold and investors around the world were looking to de-risk. In the words of Medlicott at InvestingReviews: “What the data may also indicate is overseas investors seeing the UK stock market as a safe haven in 2020, as the pandemic took grip. There was a flight to safety and the UK was clearly a major destination.”