Aviva’s equities star predicts Brexit rebound for UK companies

Aviva’s equities star predicts Brexit rebound for UK companies

David Cumming, who joined Aviva Investors in January, believes foreign investors will pile back into UK stocks once a Brexit deal has been secured

David Cumming, the star fund manager who joined Aviva Investors at the start of this year, has delivered an optimistic outlook for UK stocks. He claims foreign investors will pile back into companies once a Brexit deal has been secured.

Cumming, who joined Aviva Investors as chief investment officer for equities in January following an 18-year career at Standard Life Investments, added it is now “almost inconceivable” that the UK should leave the European Union in March 2019 without a deal.

Speaking to Financial News, Cumming said: “I’m slightly more bullish near-term on UK equities because we’ve had this long journey from June 2016 to three or four weeks away of getting a deal. A complete crash-out is almost inconceivable.”

Cumming, who left SLI in March 2017 just days after its merger with Aberdeen Asset Management was announced, believes UK stocks will experience a rebound once a Brexit deal has been agreed.

“There’s no doubt the UK equity market has significantly lagged over the last two years and the currency has been weak. There is scope for reversal,” said Cumming.

“There are quite a lot of cheap stocks in the UK. Although Brexit is a little bit of a slow puncture in terms of less investment and less confidence — which is a drag — a lot of that has already been priced in. I think there’s a little bit of scope for recovery when we get some sort of deal.”

Cumming pointed to a particular reluctance among Asian and US investors to invest in UK companies because of uncertainty surrounding Brexit.

“Once Brexit is over, the Japanese and Americans will come back,” he said.

Investors continue to be underweight UK equities amid uncertainty about the country’s future relationship with the EU.

The most recent Bank of America Merrill Lynch fund manager survey showed global fund managers are a net 19% underweight the UK, although this is an improvement on a net 42% underweight reported in March.

UK and EU negotiators are continuing work towards securing an agreement over Brexit, with time running out for both sides to obtain parliamentary approval for any deal.

Cumming added: “The stock market has been pretty weak for various other reasons, which has pulled the FTSE 100 back to the 7,000 [level]. But I see a lot of cheap companies.”

In particular, he pointed to companies in the financial services, construction and industrial sectors among those that looked particularly cheap.

Aviva Investors has hired a number of equity staff from Standard Life Aberdeen, poaching eight of Cumming’s former colleagues in July to build expertise in the asset class.

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