Oil price concern over UK and emerging market equities – F&C

UK asset manager F&C has warned of the potential threat oil prices pose to UK and emerging market equities.

Peter Lees, fund manager of the F&C UK Alpha Fund, warns that the UK equity market is still vulnerable to tensions in oil producing nations.

“The backdrop for the UK equity market is still dominated by potential geopolitical developments. Our main concern is that the economy – and with it investor sentiment – are knocked off course by oil prices being driven up further by tension in the Middle East,” he said.

Jeff Chowdhry, head of the emerging equities team at F&C, said: “The high and rising price of oil remains, a threat to world markets as it raises the dual threat of rising inflation and falling consumer demand at a time when the recovery of the developed economies is still fragile.”

Although Chowdhry believes that the eurozone sovereign debt saga is not over, and expects continued geopolitical uncertainty in the Middle East and Asia, he is sanguine about emerging market equity prospects.

“The combination of cheap stock market valuations and superior economic fundamentals will see emerging markets outperform once again.”

Lees is also positive about the prospects of his investment area, believing that the valuation of UK equities is attractive against other asset classes.

“Company results are solid, there were unexpectedly few earnings downgrades, dividends are rising and the undercurrent of merger and acquisition activity is useful.”

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