April not the cruellest month for UK companies

FTSE 100 outperformed both the MSCI World and the S&P 500 last month

April was a positive month for UK companies, according to director of Fairview Investing Ben Yearsley, as a 3.5% return from the FTSE 100 was complemented by a strong showing from both small and mid caps.

Despite sticky, double-digit inflation, and public sector debt climbing to 99.6% of GDP (£2.53trn), a percentage not seen since the 1960s, Yearsley pointed out companies continued to deliver “decent” results.

Shares in HSBC rose 4% today (2 May) after the global banking giant revealed a 74% increase in first-quarter revenues, and Yearsley commented the financials sector continued to “churn out the profits” despite the Credit Suisse and SVB turmoil.

BP also reported a solid performance for the first quarter of the year, maintaining free cash flow despite a 15% drop in first-quarter average prices for all sales of fossil fuels, according to Derren Nathan, head of equity research at Hargreaves Lansdown.

Yearsley added: “On the Forex markets, and whisper it quietly, but the pound is looking in good shape. It rose strongly against both US dollar and Yen last month, and gained marginally against the euro.”

As a consequence, Yearsley said it was no surprise to see the UK featuring strongly in the five top-performing fund sectors. UK All Companies topped the tables with an average gain of 2.53%, while UK Equity Income placed third with a 2.3% return. Europe inc UK was the fifth best-performer, posting a near 2% increase.

India and Property completed the list, with the latter featuring heavily in April’s best-performing funds, and investment-trust sectors.

Top 10 funds – April

FundReturn %
JPM Emerging Europe Equity8.26
Abrdn UK Real Estate Share7.26
VT Gravis UK Listed Property6.93
FP Mattioli Woods Property Securities6.81
Schroder ISF Emerging Europe6.35
Abrdn European Real Estate6.27
Fiera Magna Eastern European5.95
Abrdn UK Value Equity5.9
Comgest Growth Europe Smaller Companies5.58
Janus Henderson Horizon Pan European Property Equities5.4
Source: FE Analytics, 31/3/23 to 29/4/23

 

In terms of the worst-performers, Yearsley said: “The bottom of the tables looked slightly odd in April, though can probably be categorised under the “ultra-long dated duration assets” bucket – Nikko ARK Disruptive Innovation came last with a fall of 11.49% followed by Polar Smart Energy and the NB 5G Connectivity fund.

“With rates still on the up, albeit with more nuance now, these long-dated assets are still under the cosh. As ever when these high growth sectors struggle, Baillie Gifford feature – they had two funds in the bottom ten last month with their Climate Optimism fund the worst of the two falling 8.57%.”

Yearsley added China funds were the other obvious theme at the foot of the tables, with the sector falling 6.21%.

“The drop in Chinese equities was more surprising when you consider that GDP numbers released during April beat expectations with a 4.5% expansion in the first quarter compared to a forecast 4%. However, figures released on Sunday showed an unexpected manufacturing slowdown,” he added.

Bottom 10 funds – April

FundReturn %
Nikko ARK Disruptive Innovation-11.49
Polar Capital Smart Energy-9.21
NB 5G Connectivity-9
Baillie Gifford Climate Optimism-8.57
Matthews China-8.51
Fidelity China Innovation-8.36
SVS Aubrey China-8.26
Baillie Gifford China-8.23
NB Next Generation Mobility-8.23
Schroder ISF Greater China-8.2
Source: FE Analytics, 31/3/23 to 29/4/23

 

UK equities undoubtedly impressed in April, and have done so throughout the year thus far. Darius McDermott, managing director of Chelsea Financial Services, said the FTSE 100 was holding its ground having been one of the few stock markets around the world to stay in positive territory in 2022.

He added: “Performance was helped by the FTSE’s high weighting to commodity companies, banks, and multi-nationals with overseas earnings in 2022. In 2023 these tailwinds have not been so strong, yet the market is still beating both the MSCI World and the S&P 500.

“The outlook for growth is pretty gloomy, but UK listed balance sheets remain healthy, and valuations are still very low – at around a 40% discount to global equities, according to Alexandra Jackson, manager of the Rathbone UK Opportunities fund – so the home market is looking relatively attractive.”

Top 15 performers, 2023*

Fund namePercentage returns** (1 Jan to 28 April)
1Ninety One UK Special Situations14.5%
2Schroder UK Alpha Plus13.3%
3Halifax Special Situations11.6%
4Liontrust UK Focus11.5%
5Scottish Widows UK Select Growth11.4%
6Artemis UK Select11.2%
7CT UK Extended Alpha10.5%
8CT UK10.1%
9Lazard UK Omega10%
10VY Tyndall Real Income9.8%
11BNY Mellon Sustainable UK Opportunities9.8%
12CT UK Equity Opportunities9.5%
13Schroder Recovery9.4%
14Xtrackers MSCI UK IMI SRI PAB9.1%
15Jupiter UK Special Situations9%
*Source: FE Fundinfo, total returns in sterling, 1 January to 28 April 2023, IA UK Equity Income, IA UK All Companies, and IA UK Smaller Companies sectors
**Source: Mintel, 20 April 2023

 

See also: What are the drivers behind India’s ‘sizeable runway’ for growth?

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