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Re-rating potential for stocks with large pension deficits
Rising bond yields could loosen the financial noose of hefty pension scheme deficits that has strangled the share price performances of some UK companies.
This is according to recent analysis by analysts at broker Canaccord Genuity which studied 60 UK-listed companies with the largest pension deficits to market capitalisation.
There are many factors that contribute to a share price rating. But investors tend to take a particularly bleak view of large holes in company pension funds, not least because of the track record of corporate failures among those with under-funded retirement schemes.
‘The simple purpose of our commentary is to highlight the sensitivity of pension deficits to a rising yield environment, and the amplified share price response which might be experienced by those equities currently exhibiting sizeable deficits,’ says Canaccord. (SF)