The UK equity market produced a total return of 6.4% in April as measured by the FTSE All Share Index. There was a noticeable weakening of UK economic growth with only 0.1% GDP growth being reported for the first quarter of 2018. As a result, expectations for an increase in the bank rate fell and sterling declined from an exchange rate of 1.43 against the US dollar to 1.38 at the end of the month. The FTSE 100 Index of large companies returned 6.8% outperforming the more domestically focussed FTSE 250 Index of medium-sized companies.
The Oil & Gas sector was a strong performer with the Brent oil price rising from $69/bbl to $75/bbl over the month. A combination of improving demand for oil due to global economic growth and supply discipline from OPEC has been supportive for the oil price. City of London benefited with Royal Dutch Shell being its largest holding and BP fourth largest. On the other hand, British American Tobacco, the third largest holding had a poor month with its share price falling on fears about the impact of new products. In food retail, Sainsbury, where City of London has a stake, announced an agreement to buy Asda from Walmart which was well received by the market although the deal will be subject to extensive scrutiny from the competition authorities.
The dividend yield of UK equities remains attractive relative to the main alternatives, especially with the bank rate remaining at 0.5%. City of London’s portfolio continues to be predominantly invested in large, international companies, listed on the London Stock Exchange.
The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.