“UK companies offer excellent value as they are essentially self-funding purchases,” Jefferies strategists including Sean Darby wrote in a note. Political turmoil in London, combined with surging inflation and a looming recession in the UK, have been other headwinds weighing on the market. That mainly reflects increasing demand for the US currency as the Federal Reserve has moved aggressively to raise interest rates.
UK companies both in and outside the stock market have become cheaper for dollar investors this year, as the pound has plunged 17% against the greenback. Looking at UK companies, “you’ve basically got good cash flows, you’ve got strong balance sheets and they’re 40%, 50% cheaper than they were a year ago,” Mark Tinker, chief investment officer of Toscafund HK Ltd, said in a Bloomberg Television interview. Private equity giant Blackstone Inc, hedge fund Toscafund Asset Management LLP and strategists at Jefferies are united in calling a possible burst of deals in the UK after a rally in the dollar and economic and political chaos in the country leave the nation’s assets relatively cheap. A flurry of mergers and acquisitions in United Kingdom companies may be near, as a plunge in the pound has made them more attractive to foreign buyers, according to investors participating in different spheres of the market.
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