Budgets for UK mid-caps are boosted by pubs, builders and bookies
The UK midcap stocks rose on Wednesday, as investors deemed that the first UK budget of the new Labour government was less punitive than they had feared.
Mid-cap shares outperformed blue-chip stocks, even though UK Finance Minister Rachel Reeves had announced a number of new tax increases to the tune 40 billion pounds per year. These would mostly impact businesses.
"UK Chancellor Rachel Reeves delivered a fair but tough budget. Much of it was expected because the leaks to the market were already known," said Adrian Gosden. He is equities manager and fund manager for Jupiter Asset Management, based in London.
The UK is open for Business.
Domestically-focussed stocks led a charge higher, with shares of pubs, homebuilders and gambling platforms the biggest beneficiaries.
The FTSE 250 mid-cap index rose 0.4% at 1507 GMT after rising as high as 1.7% in the Budget. Meanwhile, the FTSE 100 had fallen 0.5% since the opening of the day.
The small cap stocks received an even greater boost. The FTSE AIM rose nearly 4% and is on track for its largest one-day rally in April 2020 after the government reduced business property relief to 50% instead of scrapping it entirely as investors had feared.
"AIM shares are down for a while, due in part to inflation, monetary policy, and the build-up to this budget. Amisha Chhohan, head small cap strategy for Quilter Cheviot, said that with the hurdle mostly removed and interest rates starting to drop, these smaller companies have a clear path for growth.
Eustace Santa-Barbara, co-manager of IFSL Marlborough Special Situations and UK Micro-Cap Growth, said that with the uncertainty behind us, the outlook was more positive for small-cap stocks.
He said: "This may not be the catalyst to a dramatic change in investor sentiment towards smaller UK companies, but we view it as a positive step in the direction."
He said that further rate reductions would be the most effective way to boost this market.
The UK's banks are on the rise as the budget avoids a tax on their profits. A basket of UK banks is now in positive territory.
A basket of UK housebuilder stocks soared up to 3.7%, and was the last one to rise 2%. This is after Reeves announced a housing investment of over six billion pounds ($6.48bln). Crest Nicholson Persimmon, and Taylor Wimpey all rose between 2.2%-4.8%.
Entain, the owner of Ladbrokes, and Flutter Entertainment topped the FTSE 350 index with gains between 6.5% and 7.6%. Reeves had left taxes unchanged for the sector.
Reeves' announcement of a reduction in duties on alcoholic beverages at pubs and the extension of England's Business Rate Relief for Retail and Hospitality also helped lift stocks. Wetherspoons, Marstons, and Mitchells & Butlers topped the list with gains of 2.4%-5.4%.
A basket of UK utility names also ticked up, rising as much as 1,4%.
The shares of clean energy technology company Ceres Power rose by 4.9% after the budget included an announcement for 11 new green hydrogen projects.
Hunting and Harbour Energy both saw gains of 2.6% to 4.3%. (Samuel Indyk contributed additional reporting; Amanda Cooper, William Maclean and William Maclean edited the article).
(source: Reuters)
