UK equity ETFs: ‘UK to avoid double-dip recession’

Mar 5th, 2012 | By | Category: Equities

The British Chambers of Commerce (BCC), a UK business lobby group, has downgraded its prediction for UK GDP growth in 2012 to 0.6% (from 0.8%) but, crucially, believes that a double-dip recession will be avoided.

UK Equity ETFs - UK to avoid double-dip recession

While growth has slowed, the British Chambers of Commerce believes that the UK will avoid recession.

After contracting by 0.2% in Q4 2011, the UK economy is still facing serious challenges, but risks of a further GDP decline in Q1 2012 have eased, said the BCC. The organisation anticipates prospects to improve in 2013, forecasting growth of 1.8%.

The BCC expects the main drivers of UK growth over the next two years to be net exports and business investment, but notes that debt levels are still too high and the process of de-leveraging will depress demand and will result in a relatively long period of low growth.

Commenting, John Longworth, Director General, said: “The UK economy faces serious challenges, with problems in the eurozone creating difficulties for exporters, combined with dampened domestic demand. With one quarter of negative growth behind us, growth will be slow in 2012, but we believe a recession will be avoided.”

David Kern, Chief Economist, said: “While a recession will likely be avoided, and GDP will record very little growth in the first two quarters of 2012, we expect UK economic growth to improve gradually from the second half of 2012 onwards, and to strengthen during 2013.

FEATURED PRODUCT

PowerShares FTSE RAFI UK 100 ETF (PSRU)

– FTSE RAFI UK 100 Index comprises the 100
top-ranked UK companies by fundamental value,
selected from the FTSE All Share Index

– Weights constituents using fundamental factors,
rather than market cap. Factors include dividends,
cash flow, sales and book value

– Offers elements of an active management
strategy with the benefits of passive management

– Avoids over-exposure to overvalued stocks,
while increasing exposure to undervalued stocks

– UCITS III compliant, LSE-listed, UK Distributor
Status, eligible for ISAs and SIPPS, TER 0.50%

“We expect official interest rates to remain at 0.5% until the final months of 2013, and then rise modestly to 1.00% in Q2 2014. The Quantitative Easing (QE) programme is likely to be maintained at its current level £325 billion until at least Q4 2013. A further increase in QE is unlikely on balance, as the benefits of it are questionable.

“The UK has earned considerable credibility in the financial markets as a result of the forceful fiscal policies the government has pursued since June 2010. With public-sector borrowing likely to undershoot the OBR forecast by approximately £8bn, a fiscal stimulus totalling some £4bn would be consistent with maintaining strong UK market credibility and would not endanger our AAA credit rating. The critical priority is to sustain growth while cutting the deficit.”

For investors wishing to gain exposure to UK equities, there is a large range of London-listed ETFs to choose from, tracking a number of different equity indices.

Large Cap

iShares FTSE 100 ETF (ISF)

FTSE 100 Source ETF (S100)

Credit Suisse MSCI UK Large Cap ETF (CUKL)

Credit Suisse FTSE 100 ETF (CUKX)

Lyxor FTSE 100 ETF (L100)

ComStage ETF FTSE 100 TR (8H81)

HSBC FTSE 100 ETF (HUKX)

Amundi FTSE 100 ETF (C1UG)

DB X-trackers FTSE 100 ETF (XUKX)

Small/Mid Cap

Lyxor FTSE 250 ETF (L250)

HSBC FTSE 250 ETF (HMCX)

Lyxor ETF FTSE 250 (250F)

DB x-Trackers FTSE 250 ETF (XMCX)

FTSE 250 Source ETF (S250)

iShares FTSE 250 ETF (MIDD)

ComStage ETF FTSE 250 TR (8H82)

Credit Suisse MSCI UK Small Cap ETF (CUKS)

DB X-trackers FTSE 250 ETF (XMCX)

Amundi FTSE 250 ETF (F25A)

Broad Market

DB X-trackers FTSE All-Share ETF (XASX)

ComStage ETF FTSE All-Share TR (8H80)

Lyxor FTSE All-Share ETF (FTAS)

SPDR FTSE UK All Share ETF (SPYF)

Credit Suisse MSCI UK ETF (CSUK)

Amundi MSCI UK ETF (CUK)

Income

SPDR S&P UK Dividend Aristocrats ETF (SPYG)

Amundi FTSE UK Dividend Plus ETF (AUKD)

iShares FTSE UK Dividend Plus ETF (IUKD)

Specialist

PowerShares FTSE RAFI UK 100 ETF (PSRU)

Ossiam FTSE 100 Minimum Variance ETF (UKMV)

ETFX FTSE 100 2x Leveraged ETF (LUK2)

ComStage ETF FTSE 100 2x Leveraged TR (8H84)

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