UK shares in demand ahead of general election and Kingspan not insulated from slowdown

Monday, November 18, 2019 - 10:44

“With just over three weeks until the general election, many investors are wondering how they should position their portfolios with regards to UK domestic stocks,” says Russ Mould, Investment Director at AJ Bell.

“A Conservative majority Government is generally perceived to be positive for UK stocks short-term as investors would have some clarity over how Brexit would play out. A Labour win could cause turmoil on the markets given the party wants to renationalise several sectors and shake up taxes.

“At the moment it seems like the market is pricing in a Tory victory thus investors are hoping that increased positions in UK stocks will put them in a good place to enjoy a bounce on the election result. However, a lot can change in politics in three weeks so the markets are likely to remain volatile right up to the big vote.

“The FTSE 250 index has this month traded at its highest level since October 2018 as investors bid up the part of the market which contains a lot of UK-facing businesses.

“Monday saw the FTSE 250 hold its ground at 20,410 with banks and retailers giving support to the index and the pound trading 0.4% higher against the US dollar to $1.2958. The UK currency, which is seen as the bellwether for Brexit, has bounced back since the summer after hitting a low of $1.2022 in August."

Kingspan

“Today’s update from building materials firm Kingspan looks like the company might be trying to soften up the market for a potential mild profit warning.

“The company’s leading position in high performance insulation and link to the energy efficiency theme has been a big driver of growth and made it a favourite with green funds.

“The company actually has exposure to the entire ‘building envelope’ – including the floor, roof, windows and doors which form the physical separation between the interior and exterior of a building.

“However, this niche focus doesn’t entirely insulate it from a slowing economy and the impact this has on the construction sector.

“Third quarter orders for insulated panels were down 15% in the UK and sales overall were up just 2%. The company describes its end markets as fragile and in line guidance for the full year is given with the caveat that ‘much of the seasonally variable fourth quarter is still at play’.

“Even this guidance reflects moderating profit growth, materially down on the average levels from recent years.

“The company is clearly not going into its shell entirely as the €190 million acquisition of French outfit Group Bacacier earlier this month reflects its ongoing ambitions.”

These articles are for information purposes only and are not a personal recommendation or advice.


The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.


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