September 2018
Brexit continued to overshadow sentiment in the UK during September as the EU rejected Prime Minister Theresa May’s Chequers Plan. The post-Brexit position of Northern Ireland remained unresolved, and Mrs May stressed that frictionless trade between the EU and UK was crucial to finding a solution to the issue of the Northern Irish border.
- Dividend payments in Q2 were dominated by Europe
- Brexit is affecting fund flows, according to the IA
- Demand for UK and global equity income funds remained poor in August
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Brexit continued to overshadow sentiment in the UK during September as the EU rejected Prime Minister Theresa May’s Chequers Plan. The post-Brexit position of Northern Ireland remained unresolved, and Mrs May stressed that frictionless trade between the EU and UK was crucial to finding a solution to the issue of the Northern Irish border. Brexit Secretary Dominic Raab outlined contingency plans in the event that a deal is not reached in time, but insisted he was “confident that a deal is within our grasp”.
“Investors are avoiding UK and European equity funds”
The Investment Association (IA) has found that Brexit is having a material effect on fund flows. Net retail sales of UK funds were negative during August with outflows of £217 million. The IA has found that investors are avoiding UK and European equity funds, preferring instead to diversify their risk via global and mixed-asset funds. Investors’ appetite for funds in the UK Equity Income and Global Equity Income sectors remained relatively poor in August, although net retail outflows moderated during the month.
The FTSE 100 Index rose by 1% during September, and its yield ended the month unchanged at 4.01%. Meanwhile, the FTSE 250 Index fell by 1.8% and its yield rose from 2.76% to 2.85%. In comparison, the benchmark UK government bond yield rose from 1.31% to 1.46%.
There were no changes to the FTSE 100 Index in the quarterly review of FTSE UK index constituents. There were, however, four new entrants to the FTSE 250 Index: loan provider Amigo Holdings, internet security firm Avast, spread-betting company Plus500, and downstream petroleum company Vivo Energy replaced Alfa Financial Software Holdings, retirement housebuilder McCarthy & Stone, property investment firm RDI REIT, and waste management company Renewi.
Global dividends posted headline growth of 12.9% during the second quarter of 2018, according to Janus Henderson’s Global Dividend Index, achieving a record US$97 billion. Underlying dividends rose by 9.5%, registering their fastest growth for three years. Payments in the second quarter were dominated by Europe excluding UK, and several countries – including Germany, France, Switzerland, the Netherlands, Belgium, Denmark and Ireland – hit new records. The UK posted underlying dividend growth of 13.1%, boosted by higher payouts from the mining sector; however, headline growth fell by 1.4%, undermined by a drop in special dividend payments and the decision of British American Tobacco to switch to quarterly payouts.
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