Credit Suisse Downgrades Overbought British Stocks

Credit Suisse strategists cut Britain’s equities to benchmark from overweight on Monday, citing their more cautious view on commodities and expectation that sterling has already experienced most of its decline. British stocks have outperformed their eurozone peers by around 3% since end-April as investors were attracted by relatively cheap valuations and their strong commodity exposure, Reuters reported. But Credit Suisse said it believes the sterling price of oil has peaked and the boost provided by a weaker currency to internationally-exposed Britain-listed firms might be over as the country’s economic growth outlook stabilizes and a soft Brexit is likely. “The British market is now overbought: The equity market underperforms 70% of the time this happens,” analysts at the Swiss bank said in a note on Monday. Among the possible headwinds to the British market, they also cited recent gains made by the opposition Labor party in polls, saying there is a 60% chance of a Labor government in 2022. Nevertheless, Credit Suisse said valuations of British equities were still reasonably attractive.