November 16, 2018 / 11:38 AM / 25 days ago

Hedge fund Toscafund says UK equity stocks "incredibly cheap"

LONDON, Nov 16 (Reuters) - UK share price losses following the release of Prime Minister Theresa May’s draft agreement on exiting the European Union make British stocks even more undervalued than previously, and thus more attractive, UK-based hedge fund Toscafund Asset Management said.

Toscafund, which did not comment on its positions, was among a small minority of hedge funds to openly support Britain’s exit from the European Union prior to the vote.

“UK stocks are incredibly cheap,” Toscafund chief economist Savvas Savouri, whose firm runs $4 billion in assets under management, told Reuters on Friday.

“They have never been cheaper in relation to bonds. Most well-regarded strategists are telling their clients to raise their weight in UK equities.”

The domestically-exposed FTSE 250 fell 1.3 percent on Thursday as financial and housebuilding stocks tumbled and shares in state-owned Royal Bank of Scotland suffered their worst one-day loss since June 2016.

The average yield on British corporate bonds was at 3.29 percent, based on index provider Markit’s iBoxx GBP Corporate Index, close to its highest level since the Brexit referendum in June 2016, but still low by historic standards.

Bond prices and yields move in opposite directions.

Savouri also told Reuters that he had no problem with May’s deal.

“You need something that everyone can take solace from and that was it,” he said. (Reporting by Maiya Keidan, additional reporting by Abhinav Ramnarayan; Editing by Kirsten Donovan)

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