American Investors Boost UK Shares as London Emerges as Safe Haven

More than 15 billion dollars has been injected into UK equities by American investors since the beginning of the year, providing a welcome uplift to the London Stock Exchange. While international markets have wavered amid global economic and political uncertainty, the FTSE 100 has achieved record highs, underlining the UK’s growing appeal as a safe haven for overseas capital.

Latest analysis by investment manager Schroders reveals that demand from US investors for UK shares has surpassed that for other international markets. Notably, shares listed in London are considered relatively inexpensive despite a sustained rally in recent weeks. Sue Noffke, Schroders’ head of UK equities, observed that American and international investors are attracted by the value opportunities across multiple business sectors.

US Treasury data indicates that American investor inflows have been substantial in the UK compared to Asian markets or continental Europe, where inflows lag once the UK is excluded. Such strong overseas interest underscores the attractiveness of UK equities at a time when the LSE is proactively seeking new company listings to reverse a trend of more firms delisting than joining the exchange.

There is a steady trend among domestic investors who remain cautious, continuing to avoid the UK stock market. Conversely, American investors are showing reinvigorated confidence. Exchange-traded funds tracking the FTSE experienced their first two consecutive months of net inflows in over a year, as highlighted by Morningstar Direct’s data for June and July.

Executives of major financial institutions in London, including Legal & General and Aviva, have publicly noted a marked increase in international investor appetite. Strong regulations and robust rule of law have contributed significantly to the UK’s positive investment climate. Large international firms such as Japan’s Dai-ichi Life and Meiji Yasuda Life have acquired substantial stakes in leading UK financial companies, bolstering confidence in the market’s prospects.

Relative economic stability in the UK makes it a favourable destination compared to other developed economies. Challenges faced by France, Germany, Canada and Japan have only heightened the UK’s comparative appeal. The rise in FTSE indices is also supported by UK companies buying back their own shares, further buoying market performance. With interest rates moving lower, many investors have opted to reduce cash positions in pursuit of higher returns. The focus from overseas investors has been particularly keen on financial institutions, defence, and artificial intelligence sectors. Meanwhile, several defensive domestic stocks remain attractively priced yet underappreciated by local investors.