For South African DIY investors looking to diversify beyond our borders, the United Kingdom (UK) market offers compelling opportunities that deserve a spot in your global portfolio.
The UK is an important developed market that offers political and economic stability and mature financial markets.
The Brexit factor
Before Brexit, investors could gain exposure to the UK market through European Exchange-traded funds (ETFs). However, after voting to leave the bloc in 2016, the UK now offers its own investment case.
While Brexit fundamentally altered the UK’s relationship with Europe, creating new trade barriers, regulatory divergence, and economic friction, it also forced British companies to become more globally focused, pushed down asset valuations to attractive levels, and created some unexpected opportunities.
As a result, British companies have adapted by diversifying revenue sources and focusing on global markets. The economy has shown resilience, though growth has been more subdued than that of its counterparts in the European Union.
The UK investment case
Since Brexit, the UK offers a mature, dividend-focused market trading at attractive valuations.
Many companies listed on the FTSE 100 generate significant overseas revenue, providing global exposure and diversification benefits. For example, BP (BPL-TRQX), Unilever (ULVRL-TRQX), and Vodafone (VODL-TRQX) are multinational corporations listed on the London Stock Exchange (LSE).
London remains a global financial hub, despite some activity shifted to European cities following Brexit, with HSBC (HSBAL-TRQX), Barclays (BARCL-TRQX), and NatWest Group (NWGL-TRQX) among the biggest banks listed in London.
Many of the biggest mining companies, including BHP (BHPL-TRQX), Rio Tinto (RIOL-TRQX), Glencore (GLENL-TRQX), and Anglo American (AALL-TRQX), are also listed in London because the city is a historic and leading global hub for mining finance, offering deep pools of capital, established financial infrastructure, and a large investor base interested in the sector.
This means investing in the UK market gives you indirect exposure to global revenues and international economies.
Get your share of the UK
ETFs are a great way for South African DIY investors to get their share of the UK market with broad exposure to different companies and sectors.
The Clarity, by Investec platform offers access to some of the best-performing UK ETFs, offering exposure to the UK market to express a single country view in portfolios.
Broad UK Exposure
The iShares MSCI United Kingdom ETF (EWU-NASQ) aims to track the investment results of an index composed of UK equities. The ETF offers exposure to large and mid-sized companies in the UK, predominantly in the financials, consumer staples and industrials sectors. Its largest holdings include AstraZeneca PLC (AZNL-TRQX), HSBC, Shell PLC (SHELL-TRQX), Unilever, Rolls-Royce Holdings (RRL-TRQX), and British American Tobacco (BATSL-TRQX).
Getting Exposure To the FTSE
The Franklin FTSE United Kingdom ETF (FLGB-NASQ) aims to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE UK RIC Capped Index. The ETF tracks a market-cap weighted index comprised of large- and mid-sized companies. Its largest holdings include HSBC, AstraZeneca PLC, Shell PLC, Unilever, Rolls-Royce Holdings, and British American Tobacco.
Exposure To the Top 100
iShares Core FTSE 100 UCITS ETF GBP (IFSL-TRQX) offers exposure to the 100 largest companies listed on the LSE. The ETF provides globally diversified growth through large, UK-based sector-leading companies, making it ideal for use at the core of a portfolio for investors seeking long-term growth.
