UK – The UK stock markets and economy are likely to continue to attract inward investment over the next 12 months, despite acceptance since September 11 of a worldwide recession, claims Stuart Fowler, head of UK equities at AXA Investment Managers (AXA IM).

Fowler believes that despite the turndown in the markets, government finances in the UK were in “robust” shape as it entered recession, allowing fiscal stimulus to underpin the economy.

This view is supported by Marc Breutsch, head of economic research at Swiss Life Asset Management who believes that current fiscal policy around the world, not just in the UK, will lead to growth in UK output by the second half of 2002.

Furthermore, although unemployment will rise and consumer confidence will be fragile, says Fowler, cost-cutting by companies and reduced interest rates will instil confidence in equity investors, leading to renewed profit growth.

Other factors helping the UK market remain competitive, according to Fowler, include lower oil prices, which keep inflation at bay, institutional investors using excess cash to invest in equities, and a probable increase in takeovers, encouraged by lower share prices. Breutsch suggests that inflationary pressure is also being eased by the flat house price index.

Says Fowler: “It feels as if we’ve moved through a turning point, leaving the bear market of the last two years behind us. The speed and persistence of the recovery post-September 11 has been sparked by a new acceptance that the world is in recession and at last we can see governments and companies tackling the downturn with vigour.”