John Baker, manager of the JPM UK Dynamic Fund, is maintaining his 4% overweight in UK stocks, believing the sector has further to go.
“It is important to closely gauge how bond markets react to this news flow and what we saw [last week] was muted reaction. The bond markets will price in banks having difficulty in obtaining financing. The relative lack of market reaction suggests they don’t expect banks to have trouble rising finances,” Baker said.
“We’re still happy with house builders and are maintaining our overweight, including names such as Barratt Developments and Crest Nicholson,” the manager added.
“We also continue to own Foxtons and Countrywide that are beneficiaries of the housing upturn as well as Lloyds.”
Elsewhere, Mark Boucher, manager of the Smith & Williamson UK Equity Growth Trust, broadly agreed with JP Morgan’s Baker. His fund is overweight house builders and other housing-related stocks, as well as other sectors he feels should benefit from growing consumer confidence.
Boucher said: “My views haven’t changed. I’m still positive, as FLS has been effectively made redundant by Help to Buy.
“We expect the relevant house buying data to remain strong going into 2014 and the strong earnings of the sector to remain in place.”
Douglas Charleston, portfolio manager at TwentyFour Asset Management, said the refocus of FLS was entirely appropriate given the desire to stimulate SME lending and broaden domestic growth. “However we understand that any initial drawing allowance not currently utilised will still remain available in 2014,” he added.
Currently banks have drawn £17bn out of an estimated £70bn of capacity. In other words, Charleston said that while the “headline is dramatic and is aimed at taking heat out of the housing market”, in reality substantial FLS capacity remains available and perhaps more importantly, the FLS had been only a minor driver in the UK housing recovery so far.
