Simon Gergel of Merchants Trust (MRCH ) says the cheap UK stock market is attracting interest from other fund managers, bidders and companies which are buying back the market’s undervalued stock. As a result, it’s unlikely the stock market will stay at this level for long.

This is the second excerpt from our virtual event with Merchants Trust this month. You can watch a previous excerpt on why prospective UK equities returns are strong, or a recording of the whole one-hour ‘Big Broadcast’.

Can’t watch now? Read the transcript

Simon Gergel:

We are seeing, definitely, a bit more interest in the UK. Interesting, just today, Bank of America’s fund manager survey showed fund managers are net overweight or overexposed to the UK for the first time since the middle of 2021. So significant move in positioning or where people say they’re positioning is. Not necessarily where it actually is. We’ve also seen buying from companies. A huge number of buybacks this year. Every day you just see loads and loads of announcements from companies about buying back their stock. Also, on top of that, a lot of takeovers. We’ve seen just a couple of weeks ago, a Rightmove (RMV) bid. There was TI Fluids (TIFS) bid for yesterday. I think in the first half of this year, there were 17 bids for FTSE 350 companies.

So, 17 out of 350 is almost 5% of the companies were bid for, which is clearly a huge number and that level is unsustainable, it can’t go on forever. It’s a sign of how cheap the market is and how many other companies and private equity are interested in buying UK businesses. So, I think you are seeing more interest coming back into the UK at some point, and the UK market’s starting to perform, but hopefully, that can go further.