UK equity markets declined during August as investor sentiment was undermined by escalating concern that Brexit might actually take place without the UK and EU reaching a deal. The yields on the FTSE 100 Index and the FTSE 250 Index rose over the month.
- RBS announced its first dividend payout since the financial crisis
- The value of dividends from the banking sector fell by 2% YoY in Q2
- Mainstream UK equity funds remained out of favour in July
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UK equity markets declined during August as investor sentiment was undermined by escalating concern that Brexit might actually take place without the UK and EU reaching a deal. The FTSE 100 Index fell by 4.1% over the month; meanwhile, the FTSE 250 Index posted a decline of 0.9%. The yield on the FTSE 100 Index rose from 3.79% to 4.01%, while the yield on the FTSE 250 Index’s yield climbed from 2.71% to 2.76%. In comparison, the yield on the benchmark UK government bond fell from 1.39% to 1.31%.
“Trade tensions and waning risk appetite reduced the attractions of equity funds”
Since the beginning of the year, the best-performing FTSE industry sectors have been automobiles & parts, technology hardware & equipment, food & drug retailers, and oil equipment & services. The worst-performing sectors include mobile telecommunications, tobacco, and software & computer services.
Royal Bank of Scotland (RBS) announced its first dividend payout since the company was bailed out during the financial crisis. RBS will pay an interim dividend of two pence per share once a fine imposed by the US Department of Justice has been settled, and also outlined plans to reach a payout ratio of around 40% over time. The UK Government still owns 62.4% of the bank. Barclays raised its interim dividend payment from one penny per share to 2.5 pence during the month, and Lloyds also announced an increase to its interim payout. Elsewhere, beleaguered estate agent Countrywide revealed plans to raise £140 million in a share placing.
According to Link Asset Services’ Dividend Monitor, the value of dividends from the UK banking sector fell by 2% between the second quarter of 2017 and the same period of 2018. In comparison, payouts from the mining sector rose by 95%, while dividends from the food & drug retailing sector posted a 40% increase.
Trade tensions and waning risk appetite reduced the attractions of equity funds during July, according to the most recent survey from the Investment Association (IA). Although global, Asian and Japanese funds experienced positive net retail inflows, investors avoided funds invested in European, North American, and UK equities. UK equity fund sectors – including UK All Companies and UK Equity Income – were among the worst-performing sectors during July in terms of sales. Demand for UK Smaller Companies funds, however, remained relatively strong, and the sector was ranked in the top ten over the month.
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