Investors keep up support for UK shares

Sep 03, 2021
Sentiment holds up amid dividend growth and rising valuations, says Investment Association

Investors have maintained support for UK listed companies, with July showing a second consecutive month of inflows, according to data from the Investment Association (IA).

Net retail sales to the IA’s UK All Companies sector stood at £295 mn ($409 mn) in July, building on sales of £159 mn in June, says the UK trade body.

Under the IA’s classification system, the UK All Companies sector covers funds that invest at least 80 percent of their assets in UK companies and have the main objective of capital growth.

The association says a better outlook for dividends and a rally in UK shares toward the end of July may have boosted sentiment.

Earlier this week, Link Group reported that dividend growth among AIM-listed companies grew by 56.6 percent in the first half of 2021, fueled by a boom in second-quarter payments. The sharp increase followed a 40.4 percent drop in payments during the initial year of the pandemic, said Link.

‘Typically, we experience quieter months for net retail sales over the summer period, but this year we have seen consistent and robust inflows through June and July, which speaks to investor confidence being maintained and no rush to spend the savings accumulated during the crisis,’ says Chris Cummings, CEO of the IA, in a statement.

‘We are still early in the inflation story and have not yet seen any moves away from persistent low interest rates, which makes cash saving less attractive and has potentially helped fund flows in the near term.

‘An improved dividend outlook has helped to further reduce outflows from the UK Equity Income sector after a sustained period of outflows. In the UK, dividends are not only a source of income but also an important driver of returns.’

In July the best-selling IA sectors were Global, with net retail sales of £862 mn, followed by Mixed Investment 40-85% Shares, Volatility Managed and Short Term Money Market, with UK All Companies in fifth. The worst-performing sector was Corporate Bond, which saw outflows of £205 mn.

Meanwhile, responsible investment funds continued to underline their popularity. This group witnessed net retail inflows of £1.4 bn in July, bringing total responsible investment funds to £81 bn and their overall market share to 5.3 percent, according to the IA.

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