HSBC Asset Management is forecasting UK GDP growth of 3% this year, which the group sees as a favour...
HSBC Asset Management is forecasting UK GDP growth of 3% this year, which the group sees as a favourable background for growth stocks.
The investment house also believes UK interest rates will be cut by 25 to 50 basis points during the second half of this year from the current level of 6%. Favouring growth, the group is now keen on areas including media and technology on valuation grounds. Credit Suisse Asset Management is also bullish on the outlook for UK growth stocks in the belief interest rates are set to fall over the next six months.
Phil Harris, UK smaller companies fund manager at Credit Suisse, believes UK interest rates could fall by 0.25% or 0.5% in the first half of this year.
Harris says: "We have a slowing UK economy which is going to hit the more manufacturing oriented sectors. We are looking for growth-type companies, both traditional growth and technology growth stocks, which will see their P/E ratios rise as interest rates fall and can deliver earnings growth of 15% to 20% a year."
Colin Riddles, UK smaller companies fund manager at HSBC, is favouring growth stocks such as academic publishing group Taylor & Francis and the group is also overweight media in its Smaller Companies Oeic.
He adds that media holdings do involve the risk of exposure to a slowdown in advertising spending but Taylor & Francis offers some shielding from this as its customers tend to be universities and academics.
Taylor & Francis is on a P/E of 76.4 times and the group saw its share price fall by 10.22% in the period between 14 January 2000 and 16 January 2001.
Riddles adds: "We like technology as the valuations in the sector have come down although there is some weakness still in the sector. We are looking for companies where valuations are based on achievable forecasts."
He holds technology stocks including electronic components distribution group Abacus Polar and Chloride Group, which supplies uninterruptible power supplies.
Riddles says Chloride's products are used to support telecom and computing networks and also offers products to protect telecom and computing networks from power surges in electricity supplies.
Abacus Polar saw its share price rise by 19.76% in the 12 months between 14 January 2000 and 16 January 2001 and the stock is on a P/E of 14.8 times. Chloride Group is on a P/E of 40.76 times and saw its share price rise by 69.8% in the period between 14 January 2000 and 16 January 2001.
Harris holds stocks including SDL, an internet-related company that specialises in helping other firms tailor their websites to the geographical area they are targeting, offering for example language translation. SDL saw its share price rise by 1% in the 12 months between 14 January 2000 and 16 January 2001.
Credit Suisse also holds IFA group InterAlliance, with Harris looking to benefit through the stock's exposure to the growth of high net worth individuals and their need for independent financial advice.
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