In March, the UK equity market produced a total return of 2.7% as measured by the FTSE All Share Index. There was a marked divergence between the performance of the FTSE 100 Index (of the largest 100 companies) which returned 3.3% and the FTSE 250 Index of medium-sized companies which produced a negative return of 0.1%.
The FTSE 100 Index has a bias towards large international companies and these did well during the month. Included among City of London’s largest ten holdings are Diageo, British American Tobacco and Unilever and they were all notable outperformers. In contrast, Carnival, the leading cruise ship owner and operator, had a disappointing month’s share price performance due to cautious guidance on future profits at the time of its quarterly results. However, the company has a good record of meeting its guidance and an addition was made to City of London’s stake in it.
A takeover bid was agreed for Manx Telecom, the Isle of Man’s telecommunications provider, which led to a sharp rise in its share price. City of London’s stake, which had been held since Manx’s stock market listing in 2014, was sold at a decent profit.
There still remains considerable uncertainty about the outcome of the Brexit negotiations but UK economic growth has been resilient. In addition, some 70% of the revenues of London stock market listed companies come from overseas. The change in stance to a less restrictive monetary policy from the Federal Reserve, the US central bank, should be helpful to global growth. The dividend yield from UK equities continues to be attractive relative to the main alternatives.