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Investor confidence in UK shares continues to reach record high, but caution returns

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After a strong year for UK shares, the Lloyds Bank Private Banking Investor Sentiment Index survey shows private investor confidence in UK shares asset class has remained high.

There has, however, been a small flight to safety away from Japan and emerging markets.
 
According to the monthly survey, the net sentiment among investors in UK equities increased to +40 at the start of the month, up two per cent from January, with 48 per cent of respondents holding a positive view and eight per cent holding a negative one.
 
This is in sharp contrast to the start of the survey in March 2013, when the figure was +16, with only 34 per cent positive view and 17 per cent negative.
 
Ashish Misra, head of investment policy at Lloyds Bank Private Banking, says: “This is positive for UK investors as we see faith in the UK shares as well as other UK asset classes increasing. With Europe slowly edging out of the recession, positive UK GDP data and a strong domestic property investment, it is likely that investors’ view towards UK equities is reflective of this.
 
“Of interest this month is that there has been a tangible shift in investor preference away from riskier assets like equities and emerging markets towards perceived ‘safe haven’ asset classes like government debt and gold. Investor sentiment for next month will be quite intriguing, as we look to compare our data over the year since the survey began.”
 
Sentiment towards emerging market shares saw a decrease of five per cent to +14 this month, possibly reflecting recent worries about Argentina and China, while Japanese equities saw their sharpest drop in net sentiment in the survey’s history, falling 10 per cent from the previous month to +3.  However, gold and government bonds saw a rise in sentiment, up eight per cent and one per cent respectively.
 
Investor sentiment towards Eurozone equities is still low at -23, which is down two per cent from last month. However, this is a substantial improvement of the -59 in April 2013.
 
Misra says: “Overall, the results from this month suggest that aggregate net investor sentiment is stable, even marginally better and that investors are still looking for avenues to deploy their assets away from passive cash allocations. This implies a belief in the rewards that accrue to active investors, a belief in the falling cross correlation across asset classes – some asset classes perceived negatively, some positively – and a belief in the benefits of portfolio diversification; one of the central pillars of our investment philosophy.”

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